SACRAMENTO—Having already signaled its intention to boost its commercial real estate exposure, the California Public Employees' Retirement System now is going even further. The Wall Street Journal and Bloomberg both reported Wednesday that the nation's largest pension fund plans to increase its CRE allocation by 27% over the next year, upsizing its exposure by as much as $7 billion.

As of July 31, CalPERS had allocated 8.7% of its $298-billion fund to CRE, or just under $26 billion, and later increased that target to 9.9%. It will rise yet again to 11% for fiscal 2016, Bloomberg reported.

The increase in allocation will bring the fund's CRE exposure to its highest level since before the financial crisis of 2008. However, the WSJ reported that CalPERS is taking a different tack this time.  

Prior to the crisis, CalPERS favored vehicles investing in shopping malls and office projects, with the idea of boosting returns. However, those bets led to billions of dollars in losses when the market cratered, and the fund's plan this time is to target fully leased, core office buildings and multifamily properties in gateway cities in the Golden State and across the US, according to the WSJ.

GlobeSt.com reported last month that when CalPERS said it would divest its entire $4-billion hedge fund allocation, the pension fund simultaneously boosted its investments in a number of real estate vehicles. It added $400 million to an existing partnership with Invesco Real Estate and $200 million to an existing partnership with Pacific Urban Residential. Another $600 million went to a real estate partnership with Bentall Kennedy, and $700 million to a pair of partnerships with GI Partners.

CalPERS is planning to increase its footprint for a number of reasons, GlobeSt.com, but a key factor is that it's simply time for CRE to be at the bat. “Institutional investors are always assessing and reassessing their allocations,” Stephen Culhane, head of the investment management practice at law firm Kaye Scholer, told GlobeSt.com. “Commercial real estate valuations are strong and it is perceived as a bit as a safe haven, particularly for non-US and long-term investors.”