Kentucky Retirement Systems puts $165 million into three alternatives funds

Kentucky Retirement Systems, Frankfort, committed a total of $165 million to three alternatives funds, confirmed T.J. Carlson, chief investment officer.

The $14.1 billion pension system committed $56 million to Amerra Agri Fund II, an agriculture fund managed by Amerra Capital Management that will be part of the pension fund's real-return portfolio.

It also committed $55 million to Greenfield Acquisition Partners VI, a value-added opportunistic real estate fund managed by Greenfield Partners, and $54 million to Riverside Capital Appreciation Fund VI, a middle-market buyout fund managed by Riverside Co.

Separately, the board hired Albourne Partners as its first absolute-return and real-return consultant, Mr. Carlson said in a telephone interview. An RFP was issued in June. KRS has a 10% target allocation to each asset class.

The board also approved hiring BNY Mellon as global custodian, replacing Northern Trust, which rebid. Mr. Carlson said the two firms were “very close” in evaluations, but the primary driver behind the decision was BNY Mellon's edge in its technology platform. An RFP was issued in September.

Also, KRS' actuarial consultant, Cavanaugh Macdonald Consulting, presented the actuarial valuations of the fiscal year ended June 30, reporting the $2.9 billion Kentucky Employees Retirement System Non-Hazardous plan's funded status dropped to 27.3% from 33.3% the year before — which according to Morningstar was the lowest among state pension funds with at least $1 billion in assets of June 30, 2011.

Mr. Carlson said the drop was not unexpected as the state is paying only about 57% of the actuarially required contribution and that the funded status will likely bottom out in the teens, percentage-wise, before going up.

A Kentucky public pension task force recently recommended that a future pension reform bill in the state Legislature includes requiring the state to pay the full ARC starting July 1, 2014. There is currently a phase-in plan to reach the full ARC by 2025 for the KERS Non-Hazardous plan.