Real assets team reports portfolio shift: allocations, cash flows and infrastructure gains
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Summary
SFERS staff reported a 14% allocation to real assets at year‑end, improved cash flows (portfolio self‑funding in 2025), and infrastructure’s outperformance among real‑assets substrategies, while continuing cautious deployment amid fundraising headwinds.
San Francisco Employees’ Retirement System investment staff reported to the retirement board that the real assets program has evolved from a U.S. core real‑estate portfolio into a diversified mix including global real estate, natural resources and infrastructure.
Tanya Kemp, managing director for private markets, told commissioners that real assets finished 2024 at about a 14% allocation — above the plan target of 10% — with roughly $5 billion in NAV and approximately $2 billion in unfunded commitments. Staff said that capital calls dropped substantially in 2024 ($18 million funded) compared with 2023 ($123 million funded), and year‑to‑date cash flow turned positive in 2025.
Kemp and colleagues said performance in 2024 was mixed across strategies: infrastructure returned about 7.2% for the year and was the strongest contributor, natural resources were roughly flat, and private real‑estate valuations were down as managers took markdowns to reflect higher interest rates. The team said data center and power investments have attracted fundraising due to demand tied to AI and digital infrastructure.
Staff said deployment in 2024 was deliberately modest — roughly $400 million across six commitments, with about 80% of that into real estate and 20% into infrastructure — and they plan to pace commitments at roughly $500–600 million per year going forward while monitoring market conditions and their overweight to real assets.
Cambridge Associates, the system’s consultant, told the board that transaction activity remains muted but is improving and that the plan’s exposures to residential and industrial strategies have held up relatively well. Cambridge noted the potential for opportunistic purchasing where owners face refinancing stress and highlighted secondary markets and selective infrastructure as areas of focus.
Board members discussed portfolio tilts to digital infrastructure (data centers, fiber) and the potential for opportunistic purchases amid market stress; staff said they expect to continue increasing U.S. real‑estate commitments over time and to grow infrastructure exposure toward the target.
