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Pension Funds

Kentucky revamps target asset allocations for pension funds, insurance plans

Kentucky Retirement Systems, Frankfort, approved changes to the target asset allocations for its five pension funds and five insurance plans, which have $17.4 billion in assets combined, said David Eager, executive director.

The five pension and insurance plans are the Kentucky Employees Retirement System hazardous and non-hazardous pension and insurance plans, County Employees Retirement System hazardous and non-hazardous pension and insurance plans, and the State Police Retirement System pension and insurance plans.

The real estate target remained the same for all 10 plans at 5%, while the hedge funds/opportunistic target was reduced for all 10 plans to 3% from 10%, and the real-return target was increased for all 10 plans to 15% from 10%.

The private equity target — previously 10% for all 10 plans — was reduced to 7% for KERS non-hazardous and SPRS pension plans. It remains at 10% for the three other pension plans and five insurance plans.

U.S. and international equity targets — previously 17.5% each for all 10 plans — were reduced to 15.75% each for KERS non-hazardous and SPRS pension plans and bumped up to 18.75% each for the three other pension plans and five insurance plans.

The high-yield/credit fixed-income target was reduced to 15% for all 10 plans — down from 17% previously for KERS non-hazardous and SPRS pension plans and 24% for the three other pension plans and five insurance plans.

The core fixed-income target was bumped up to 20.5% from 10% for the KERS non-hazardous and SPRS pension plans and bumped up to 13.5% from 4% for the three other pension plans and five insurance plans.

The cash target remained at 3% for the KERS non-hazardous and SPRS pension plans and was reduced to 1% from 2% for the three other pension plans and insurance plans.

The asset allocation changes were recommended by KRS' investment consultant, Wilshire Consulting.

According to materials prepared for last week's board meeting, the new asset allocation is expected to raise the funds' liquidity profile and reduce expected volatility and sensitivity to economic growth.

Rich Robben, interim chief investment officer, could not immediately be reached for additional information on the changes.