Should the foreign exposure be currency hedged?

A major US public pension fund (PF) has $10 billion invested in real estate (10% of its overall assets). The PF is proud of its fully operational, vertically integrated real estate department, which sources, analyzes, and manages all of its assets. Because of its expertise the PF has never invested “indirectly,” i.e. via real estate funds. To date, all of its real estate assets are located inside the United States.
The board of trustees of the pension fund had recently commissioned a study by a well-respected, industry leading consulting firm, which has recommended that the PF should also consider real estate investing in foreign markets to “enhance returns” while simultaneously reducing overall investment risk with a more geographically diversified portfolio.
The PF’s board of trustees has tasked the head of its real estate department to come up with a strategy to invest up to $5 billion in into foreign real estate markets. In turn the department head has selected you, a young, ambitious recent graduate from Georgetown’s MPRE Real Estate Program, to devise an action plan for strategic implementation.
As time is of the essence you must come up with a 2-page paper outlining a suitable strategy for the relatively conservative pension fund. Specifically, the 62-year old “veteran” head of the real estate department, is asking you to address the following issues and concerns relating to the new $5 billion allocation to foreign real estate:
Geographical allocation
Sectoral allocation
Risk/reward profile
Should only developed markets be considered or emerging market as well?
Should the foreign exposure be currency hedged?
Finally, the board of trustees has instructed the head of the real estate department that “time is of the essence” and that it wants the recommended strategy to be implemented as expeditiously as possible.
[Tip: You are not to come up with a fully defined, detailed strategy. You should outline one or two strategies and evaluate them with their respective strengths and weaknesses. Make sure you discuss the staffing level your choice of strategy will require.]
Your submission is expected to be of high quality and submitted in the proper format. It will be considered for writing, content, and professional appearance including the use of proper grammar, punctuation, spelling, and structure.

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