Citing strong market performance, the nation's two largest pension funds—the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS)—separately announced increases to asset allocation for real estate in December 2007. CalSTRS said that it intends to increase the real estate allocation of its $180 billion portfolio from 9 percent to 11 percent; CalPERS subsequently announced that the real estate reallocation of its $250 billion portfolio would grow from 8 percent to 10 percent. Both increases are target reallocations, not definite investment commitments.

CalSTRS had already reached the 10 percent allocation mark as of Jan. 1, according to spokesperson Sherry Reser. “It all comes down to the marketplace and where the opportunities are,” Reser says. “We had a 21 percent total portfolio return in the last fiscal year and the real estate component was through the roof at 32.9 percent.”

CalPERS is equally bullish on real estate. “It's now a buyer's market, and we're not reluctant to shop. We did as much in the early 1990s real estate slump [and] sold many of those good deal properties a decade later to achieve a 35 percent annual return,” says spokesman Clark McKinley.

While both CalPERS and CalSTRS have expressed interest in increasing their exposure to international real estate, neither pension fund details specific plans related to the multifamily sector. “This is an opportunistic plan, which means that we don't have designated targets and allocations,” McKinley says.