South Carolina Retirement System considers new asset allocation options

South Carolina Retirement System Investment Commission, Columbia, reviewed the results of an asset-liability study and discussed a new asset allocation on Thursday.

Four asset mixes were presented by investment consultant Hewitt EnnisKnupp for the $26.6 billion South Carolina Retirement Systems. A new asset allocation must be approved by May 1 for the fiscal year beginning July 1, said Adam Jordan, strategic partnerships director.

In the asset allocation Hewitt EnnisKnupp recommended, all public equity would be combined into a single global equity allocation with a target weighting of 40% of total assets, up from 38.5%. Diversified credit would drop to 19% from 20.5%; conservative fixed income, to 15% from 20%; real assets would increase to 8% from 6%; and opportunistic strategies, to 18% from 15%.

A portable-alpha strategy that invests in hedge funds, with $3.9 billion, or 15% of plan assets, would be eliminated if any of the four asset mixes is approved.

The recommended asset allocation with its “subtle” changes will result in a higher expected return with slightly lower risk, Suzanne Bernard, a Hewitt EnnisKnupp partner and South Carolina's lead consultant, said in her presentation to commissioners.

The mix Hewitt EnnisKnupp favors will return a projected 7.14% annualized over the 10 years beginning July 1, compared to a projected 7% for the current allocation.

Among likely changes to underlying asset classes would be a move to passive or enhanced index managers where “alpha can't be reliably counted on” from active managers, said Hershel Harper Jr., chief investment officer.

The commission also approved Darry Oliver as chief operating officer. The position was created when the commission separated the CEO and CIO positions last year, and changed the CEO position to COO. Mr. Harper was named CIO at the time, having previously served as deputy CIO. David E. Phillips took over that role.

Mr. Oliver most recently was chief financial officer and a partner at venture capital manager Edison Ventures. Mr. Jordan's position also is new; he had been chief of staff.

David Klauka moved to manager research director from director of private markets; Sarah Corbett, operational due diligence director from deputy chief of staff; and Geoffrey Berg, internal asset management director from director of opportunistic strategies.

Information was not available about their replacements.