The Chicago Public School Teachers' Pension and Retirement Fund is considering a new asset allocation that would almost double its international equities to 22% of the $11 billion fund, up from the current 12.5%. Funding would come from dropping the domestic equity allocation to 44% from 48.5% and fixed income to 23% from 28%. The fund's other allocations would remain the same: real estate, 7%; private equity, 2%; and cash 2%.
Mercer Investment Consulting, the fund's consultant, proposed the allocation in part because the fund's need for liquidity to meet high benefit payments "prevents us from recommending an increase in less liquid strategies such as private equity and hedge funds," according to the Mercer allocation report. The fund has no allocation to hedge funds.
The growth of the unfunded pension liability argues for "maintaining a fairly aggressive (investment) policy," the report states.
The fund's investment committee asked Mercer, which proposed the allocation, to do more modeling.