The California Public Employees' Retirement System (CalPERS) is to increase its $11.6bn real estate allocation with opportunistic investments in cross-category European real estate, according to a spokesman for the fund.

His comments followed the announcement made recently that the largest US pension fund is to invest in Mediterranean holiday homes via a €231m fund set up in cooperation with private developers Hines.

The pension fund is looking abroad to Europe and Asia - in particular China - after significant performance in its domestic market, with a
major sell-off just before it peaked in 2005. CalPERS posted annual returns earlier this year up some 39.4%.

"This is part of our overall strategy to take advantage of global market opportunities," said CalPERS spokesman Clark McKinley.

"We are pursuing opportunistic ventures in the sense that we are not limiting ourselves to specific markets or categories, although we are generally staying with the allocation ranges that have been set by the board." CalPERS currently has $11.6bn invested in real estate.

HCS Interests, the fund jointly launched with Hines, will exploit opportunities in the Spanish, primarily coastal, second- and holiday-home market. It will be the fourth fund set up by the partners.

Of the three existing joint funds, National Office Partners invests in the US; HCB Holdings invests in Brazil; and HCM Holdings invests in Mexico.

McKinley described Hines as "a reliable, productive partner" and the residential sector as "particularly promising, especially in the Spanish coast region".

The partners have set a target of three years for initial investment. The new fund will have a 10-year life.