"We live in a more global economy and investment culture now, and in light of this, we think that the state's rules are outdated and need to be updated to provide us with greater investment flexibility," said John Keane, the plan's executive director. As of April 30, 60.3% of the plan's assets were invested in equity and 33.4 % in fixed income, with the remaining assets invested in two real estate portfolios.
The proposal that Mr. Keane is drafting — along with Mr. Klausner, the system's attorney — would specifically amend the portions of Florida law that govern how plan trustees may invest pension assets
There are 366 police and fire plans in the state with a combined $10.4 billion in assets, according to the Florida Division of Retirement, Tallahassee. Mr. Klausner explained that not all of these plans are subject to every restriction — they can avoid most of the restrictions by placing the rebated state assets in "supplemental" pension plans, such as defined contribution plans. Also, some systems may have received individual exemptions to the statutes from the state over the years.
However, every police and fire retirement plan that receives state money is subject to the 10% limit on international investments, Mr. Klausner said.
Mr. Keane said he and Mr. Klausner are doing a "comprehensive rewrite" of the investment guidelines that will ultimately serve as a "uniform" investment code for the state's police and fire plans. "We will be taking it out to other state police and fire systems, as well as labor unions, for their support shortly," said Mr. Keane, adding that the proposal will be complete by Sept. 1 and could go into effect by July 2006.
The most appealing part of the proposal is eliminating the limits on investing in international securities, Mr. Klausner said. A number of state police and fire officials say that the 10% ceiling makes it more difficult to manage a plans' overall asset allocation and investment strategies.
"Lifting the limit on international will allow plan sponsors to avoid micromanaging portions of their portfolios," said Mr. Klausner.
Robert Nagle, administrator of the $1.3 billion City of Miami Firefighters and Police Retirement Trust, and John Girard, trustee for the $131 million Boca Raton Police and Firefighters Retirement System, said they would support the proposal. Mr. Girard said lifting the restriction would maximize potential performance.
If approved, Mr. Keane said, the ultimate result will be allow for greater investment diversification. However, the state's police and fire pension plans aren't likely to immediately make dramatic adjustments to their investment strategies, he said.
That appears to be the case in states such as New Mexico, where the state Legislature in July allowed state pension plans to invest in alternatives. Robert E. Gish, director of investments for the $10.1 billion Public Employees Retirement Association of New Mexico, Santa Fe, said his plan is taking calculated steps to invest in new asset classes. "It's ultimately a function of the perceived level of risk that your board believes is appropriate for their fund," "We want the lowest risk with the greatest returns possible."
Mr. Gish said the he expects the system and its trustees will educate itself on alternatives for the next six to nine months.
