The $26 billion Massachusetts PRIM Board slashed its U.S. equity and domestic fixed-income exposure while adding a new absolute-return hedge fund allocation of 5% of total assets. The changes are the result of an asset allocation review.
Domestic equity was reduced to 26% from 38%; U.S. fixed income was cut to 10% from 16%; and international equity was trimmed to 15% from 17%. Emerging market equity was raised to 5% from 3%; high yield was increased to 9% from 3%, including a new allocation of two percentage points to emerging market debt; real estate was boosted to 10% from 6%; and timber increased to 5% from 2%.
Plan officials want to diversify and reduce risk, said Timothy Cahill, PRIM board chairman and state treasurer. The changes are designed to "take out the wild rides" and increase the funding level, he said.
Separately, the fund hired Standish Mellon Asset Management to run a $650 million enhanced cash portfolio, said Stan Mavromates, senior investment officer. Global custodian Mellon had run the portfolio.