Indiana Public Employees Retirement Fund, Indianapolis, tripled its allocation to alternative investments to 15% of the $14.5 billion fund, adding absolute return and commodities for the first time, said Shawn D. Wischmeier, CIO. The fund's board will allocate 2% of total assets each to absolute return and commodities, increase private equity to 8% from 4% and raise real estate to 3% from 1%, with targets ranging to a maximum of 5%. The range for private equity is up to 10%. The fund will decrease its fixed-income allocation to 20% from 30%, cutting core fixed income to 15% from 20% and Treasury inflation-protection securities to 5% from 10%.
It will also boost international equities to 15% of assets from 11%, and global equities to 10% from 9%, while cutting domestic equities to 40% from 45%. The overall equity allocation will remain at 65%.
The allocation changes are designed to raise the fund's expected annual return to 8.11% from 7.74% without taking undue risks, Mr. Wischmeier said. They are the result of an asset allocation study done by Mercer Investment Consulting, the plan's first since 2003. The board expects to implement the equity and fixed-income changes by the end of 2007 and the alternatives changes by the end of 2012.
The board is working with consultants Mercer, mainly on the public securities side, and Strategic Investment Solutions, mainly on the alternatives side, to formulate plans for changes to be made with existing managers, including any terminations, and what searches for alternative managers will be undertaken, Mr. Wischmeier said. No timetable has been set for completing the implementation plan; the board will implement the new alternatives allocation slowly to spread the risk by investing over six years, he noted.