San Francisco City & County Employees' Retirement System approved changes to its fixed-income targets, said David Kushner, deputy director for investments. The board will reduce internally managed fixed income to 18% of assets from 25%; increase externally managed core-plus fixed income to 26% from 22%; reduce high-yield corporate bonds to 6% from 8%; and increase global bonds to 25% from 20%.
Mr. Kushner said the changes will result in the "reallocation" of assets to existing managers but declined to offer specifics. Western Asset Management currently runs $820 million in a core-plus strategy, and Bridgewater Associates and Fischer Francis Trees & Watts manage $386 million and $348 million, respectively, in global bonds.
The board decided to implement the changes, in part, because the "strategy of the internal (managed) portfolio as it is currently constructed is not expected to do as well" as external managers, Mr. Kushner said.
The $12.8 billion system has about $4 billion invested in fixed income.
The board and consultant Angeles Investment Advisors are also evaluating other fixed-income approaches not currently used by the fund, including absolute return-oriented approaches or the use of leverage to increase returns, according to the system's August meeting agenda.