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INVESTING/PORTFOLIO STRATEGIES

Ohio State Teachers shifts asset allocation, reduces assumed rate of return

Ohio State Teachers Retirement System, Columbus, increased its target allocation to fixed income and opportunistic/diversified alternative investments as a result of an asset-liability study, and also reduced its assumed rate of return, according to a posting on the retirement system's website.

The $73.3 billion pension fund's board approved increasing targets to broad domestic fixed income to 21% from 18% and opportunistic/diversified to 10% from 7%, and decreases to broad domestic equity to 28% from 31% and broad international equity to 23% from 26%. The 10% target to real estate, 7% target to private equity and 1% target to liquidity reserves remain unchanged.

The retirement system's general investment consultant, Callan Associates, conducted the five-year asset-liability study and the changes reflect an intention to “provide lower volatility with a slightly lower expected rate of return,” according to the posting.

Whether any external managers would be hired or terminated as a result of these changes could not be immediately learned.

The board also approved lowering the assumed rate of return for the defined benefit plan to 7.45% from 7.75% following an experience study conducted by actuarial consultant The Segal Group. With the new assumptions, the funding ratio “drops to 62.4% from 69.6%, and the (full) funding period increased to 59.5 years from 26.6 years, according to the posting. “The funding period falls outside of the state of Ohio's 30-year funding target, and will require STRS Ohio to present a plan to reduce its funding period to 30 years or less.”

The board will discuss that plan at its April meeting.

As of Feb. 28, the actual allocation was 31.1% domestic equity, 26.5% international equity, 15.1% fixed income, 11.3% real estate, 7.3% opportunistic/diversified alternative investments, 6.4% private equity, and 2.3% liquidity reserves.

Nick Treneff, pension fund spokesman, could not be immediately reached to provide further information.