Ohio Police & Fire Pension Fund to add MLPs, cut equities
By Rob Kozlowski | December 13, 2012 12:35 pm
Ohio Police & Fire Pension Fund, Columbus, is adding a 5% allocation to master limited partnerships and decreasing its equity exposure as the result of an asset-liability study, confirmed spokesman David Graham.
The $12.4 billion pension fund has begun an invitation-only search for MLP managers as a result of the study, conducted by staff and investment consultant Wilshire Associates, Mr. Graham said. The pension fund's board of trustees will consider prospective MLP managers at its January meeting.
The pension fund's target allocations to domestic and international equity have been decreased to 18.5% each, from 21.7% each.
Timber was raised to 5% from 3%, while global inflation-linked bonds increased to 13% from 12.9% and private markets increased to 8% from 7%.
A new target allocation for core fixed income was established at 23%, while a 23.7% target to long-duration fixed income was eliminated. The pension fund had not begun to invest in those strategies. A commodities target of 3% was also eliminated, also one in which the pension fund had not made any commitments.
High yield and real estate remained unchanged at 15% and 12%, respectively, while a leverage allocation, which is part of the risk-parity approach adopted in the pension fund's last study, was decreased to -20% from -18%.
Separately, the pension fund's real estate consultant, Townsend Group, recommended a 2013 real estate investment plan designed to get the pension fund up to its 12% target, as well as to pursue “the strategic objectives of inflation hedging, diversification, and attractive risk-adjusted returns,” Mr. Graham wrote in an e-mail.
Total non-core real estate commitments in 2013 will be $170 million to $230 million, with $30 million to $70 million per investment.
The current actual allocation to real estate is 10.1%.
Also, the pension fund committed $55 million to Warburg Pincus Private Equity XI, a first-time commitment to a Warburg Pincus fund. The actual allocation to private markets is 4.1%, compared to the 8% target.