Pension reform measures could lead to new investments at Phoenix City Employees
By Rob Kozlowski | March 13, 2013 3:10 pm
Phoenix City Employees' Retirement System might search for private equity, below-investment-grade debt and real assets before the end of the year as a result of a special city election on Tuesday, said Greg Fitchet, investment manager for the $2 billion pension fund.
Proposition 202, which amended the investment standards, legal status and funding provisions for the pension fund, won 77% of the vote at Tuesday's special citywide election. The Phoenix City Council is scheduled to vote on certification of the proposition on March 20.
The changes would be effective on July 1. Mr. Fitchet said staff and investment consultant R.V. Kuhns & Associates are scheduled to educate trustees on private equity and real assets such as commodities, energy, infrastructure, master limited partnerships and timber at its March 21 meeting, and below-investment-grade debt at its April 18 meeting.
R.V. Kuhns is scheduled to conduct an asset allocation study in May, according to Mr. Fitchet. Existing managers would likely get any additional allocations first that result from the study, with possible searches coming in the fourth quarter.
The exploration of new asset classes is the result of eliminations in the existing investment standards that now prevent the pension fund from investing in asset classes such as private equity, high-yield debt and some real asset classes.
As of Jan. 16, the pension fund's actual allocation was 21.7% international equities, 19.4% fixed income, 16.9% domestic large-cap equities, 11.4% real estate, 9.3% long/short equity, 9.1% real returns, 7.3% domestic small/midcap equities and 4.9% emerging markets debt.
The pension fund's current targets are 22% international equities, 20% fixed income, 16.5% domestic large-cap equities, 15% real estate, 10% long/short equity, 6.5% domestic small/midcap equities, 5% emerging markets debt and 5% real returns.
Eighty percent of voters were also in favor of Proposition 201, which raises the calculation of retirement eligibility and increases employee contributions for city employees hired on or after July 1.