Investors looking for broader returns in the 1990s; they want to meet perceived socioeconomic needs.

Nobody's predicting a building boom, but investment advisers say one of the newest terms in their vocabulary could usher in a mini-wave of development in California.

The term is "economically targeted investments," or ETI, a phrase so new that some in the real estate industry say they've only heard of it in the past few months.

On the other hand, some of the state's largest pension trusts have already committed funds to ETI projects, or are considering them, and investment advisers said they foresee more funding for ETIs as prospective investors learn more about them.

For example, the giant California Public Employees Retirement System, also known as Calpers, is investing $375 million in California single-family home construction loans and has committed $50 million to a statewide fund for neighborhood development.

In another example, Glendale-based American Realty Advisors (formerly Birtcher Realty Advisors) acted as investment adviser to the Construction Pension Realty Corp. on the financing of a 198-unit luxury apartment project in Minneapolis.

What these investments have in common is that, in addition to receiving a financial return on investment, the investors are aiming to meet a perceived socioeconomic need.

In Calpers' case, for example, the pension fund sees a need for more affordable homes in the state, where new housing starts have dropped from a high of 162,600 in 1989 to fewer than 75,000 in 1992. On the Minneapolis project, financing was provided by the Construction Pension Realty Corp. with the economic target of generating union jobs.

Public and union pension funds are considered the most likely source of ETI funds, mainly because they have both the money and -- at least in some cases -- the inclination to invest it in ETIs. Calpers, with $70 billion in assets, and the California State Teachers Retirement System, also known as Calstrs, the $40 billion-in-assets statewide teachers' pension fund, are two of the biggest pension funds in the nation.

Stanley Iezman, president of American Realty Advisors, said an ETI can serve an economic or social purpose that an investor deems worthy, but he and others familiar with the concept insist that investments must first and foremost make economic sense.

"All the projects that we are doing have to have an under-riding investment purpose, and the economics have to be competitive with returns in other investment classes," Iezman said.

Iezman added that economically targeted investing "can take any form you want it to."

Besides providing union jobs, some of the most common socially oriented economic purposes of ETI projects are helping to increase the supply of single-family homes, low-income housing, neighborhood shopping centers and apartment buildings.

For union pension funds, creating union jobs is often the "economic target." For example, the AFL-CIO has committed up to $75 million to projects in riot-affected areas of inner-city Los Angeles, according to John Hanley, an AFL-CIO investment officer. But Hanley said the projects must first be sound investments that will provide fair market rates of return.

Calpers is generally acknowledged as the ETI leader among public pension funds in California. Neither the $14 billion-in-assets Los Angeles County Employees Retirement Association nor the three City of Los Angeles pension funds has yet become involved in ETIs, although officials of those funds say they are aware of the trend.

Norman Johnson, chairman of the board of investments that directs the county's pension fund, said the board is open to ETIs that would provide a good investment opportunity. But he emphasized, "We will first and foremost consider whether it is a prudent investment."

According to Gary Mattingly, manager of the $5 billion-in-assets City of Los Angeles Fire & Police Employees Pension Fund, many public fund managers are still learning about ETIs. Mattingly said Institutional Investor, a professional journal, plans to sponsor a conference on the subject in February in Marina del Rey.

Oscar Peters, manager of the $3.5 billion-in-assets City of Los Angeles General Municipal Employees Pension Fund, said that fund has no money in ETIs. But the fund's asset allocation program does designate $175 million for real estate investments, Peters added.

According to Kirsten Moy, a vice president at Equitable Real Estate Investment Management Inc., defining what constitutes an ETI can be tricky because the term is used to describe "everything from venture capital to single-family mortgage loans to commercial real estate to private placements for middle-market companies."

Often, Moy said, the investment is targeted to improve the economy of a geographic area. For example, the California Community Mortgage Fund is targeted to improving California's economy by providing mortgage loans. Calpers has agreed to invest $50 million in the fund, on the condition that other investors commit an equal amount.

Although Calpers announced that commitment way back in April 1991, Equitable, the fund's portfolio manager, has yet to line up the stipulated $50 million from outside investors. Jonathan Miller, an Equitable spokesman, declined to specify how close the fund is to reaching its $50 million goal.

"We have a policy of not discussing that issue until we have all of our investors in place," Miller said. "But we hope and expect it will be soon."

Moy, who is portfolio manager for the fund, said some investors may be wary of ETIs because "there is some perception that ETIs and sound investments are mutually exclusive."

"I don't think that needs to be the case," Moy said. "It goes without saying that it has to be a sound investment. If it's not, we (public funds) shouldn't even be looking at it."

Moy explained that the California Community Mortgage Fund would be designated for investments within the state and would provide mortgage loans of $1 million to $5 million in "neighborhoods and communities."

"We would not be likely to fund something in downtown Los Angeles, but it's possible we could finance something in one of the communities near downtown," she said.

Half of the fund would be designated for affordable, multi-family housing, and the other half would be for retail, commercial and light industrial projects.

Moy said Equitable for 15 years has maintained its own fund, called the Community Mortgage Portfolio, to invest in what today would be called ETI projects. She said that portfolio, which has invested more than $90 million in real estate and real estate-related projects in 15 states, has returned "an average annual yield close to 10 percent since inception," with a loss rate "below industry norms for commercial mortgages."

Moy, who testified about the Community Mortgage Fund in July at a California State Assembly special committee hearing on the Los Angeles riots, said one reason ETIs may gain favor with pension funds is that "community investment is one area that has not been overbuilt in the recent cycle of real estate development."

"People have not been rushing in to build affordable housing or neighborhood shopping centers. They've been doing a lot of downtown office buildings," Moy pointed out.

Iezman of American Realty Advisors made the same point. He said American Realty sees ETI opportunities in many of the "secondary markets" within the outlying regions of Los Angeles County and adjacent counties, including the Antelope Valley, Simi Valley, the outskirts of Orange and Riverside counties, and Imperial Valley.

Despite what many view as a glut of retail space in L.A. County, Iezman said his company sees opportunities to invest in "neighborhood and community shopping centers where there is a key anchor involved and there is something unique about the project."

Moy noted that ETI is not actually a new concept, just a new term for a general approach that has been extended to commercial real estate investments that pension funds haven't traditionally favored. Many pension funds, in fact, have engaged in a form of ETI by providing home loans to their members. Calpers, for example, has a 5-year-old program that provides home loans to its members "at competitive interest rates and with low loan origination fees," said spokeswoman Judy Burns.

"We view it as not only a good investment for our fund, but as a service for our retirees," Burns said.

According to an Equitable report on ETIs, many pension funds also are already practicing economically targeted investing when they buy "screened" stock portfolios that have an underlying social or economic goal - such as excluding stocks of South African companies.

If real estate ETIs catch on, the dollar amounts that investment advisers anticipate won't approach the billions that once flowed into real estate from savings and loans. But ETIs, they say, could provide financing for smaller-scale projects in market niches that weren't overbuilt in the 1980s building boom.