The California Public Employees’ Retirement System (CalPERS) made headlines in February when it decided to focus at least 75 percent of its $16 billion real estate portfolio on core properties. But a new study suggests that a core-focused approach fails to provide risk-reducing diversification for pension funds.

“Pension funds have tended to say, ‘The losses in opportunistic funds and value-added funds were horrible. Let’s get out of them and put all our real estate money in core funds,’” says Brad Case, senior vice president, research and industry information at the National Association of Real Estate Investment Trusts (NAREIT). “That will not reduce risk. The only way you can do it is to combine private and public real estate holdings.”

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