South Carolina Retirement Systems, Columbia, returned 4.3% in the quarter ended Sept. 30, topping the pension fund's policy index by 0.3 percentage points.
Plan returns were provided by investment consultant Hewitt EnnisKnupp to the South Carolina Retirement System Investment Commission at a meeting on Thursday. The commission oversees investment of the $27.7 billion pension fund.
The portfolio's annualized returns were above the internal benchmark in longer periods ended Sept. 30: one year, 7.1% (benchmark, 6%); three years, 8.2% (benchmark, 7.1%); and five years, 7.1% (benchmark, 5.9%), according to meeting documents.
Hershel Harper Jr., the commission's chief investment officer, said the investment staff is working to reduce target overweights in hedge funds and credit, according to the investment commission's first webcast of a regularly scheduled meeting.
A $250 million structured credit allocation invested by Strategos Capital Management in asset-backed securities now has been completely redeemed. Mr. Harper told commissioners that he has been gradually reducing the allocation through rebalancing, according to the webcast.
The actual hedge fund allocation as of Sept. 30 was 10.6% compared to the target weighting of 8%. Mr. Harper said the hedge fund portfolio has to be reduced by between $800 million and $900 million to be brought back to its prescribed target. He said other changes also are being made within the $2.9 billion hedge fund portfolio, but he did not describe the changes or name the managers that are being terminated or their allocations reduced in the meeting webcast.
Looking forward, Mr. Harper said the investment unit will present a review of the pension fund's securities lending practices, possibly resulting in changes, at the commission's Feb. 27 meeting. BNY Mellon currently is the pension fund's global custodian and handles securities lending.
The commission also will consider the pension fund's asset allocation for the fiscal year ended June 30, 2015, at the February meeting, Mr. Harper said, according to the webcast.