San Francisco City & County Employees Retirement System increased its core-plus fixed-income allocation to 62% of its $4.7 billion overall fixed-income portfolio, from 55%, funded by cuts in high-yield CMBS, commercial mortgages and the funds internal bond portfolio, confirmed David Kushner, deputy director of the $15.8 billion system.
The systems board on Tuesday approved trimming high-yield commercial mortgage-backed securities by three percentage points to 5% of the fixed-income portfolio and commercial mortgages by three percentage points to 7% to partially fund the core-plus increase; the remainder will come from the internal portfolio, which will now be 13% of the bond portfolio.
Mr. Kushner said staff will move opportunistically in implementing the changes, and he could not say if or when RFPs would be issued or which managers would be affected.
The systems current high-yield CMBS managers are Fidelity, which manages $198.5 million, and Hyperion Brookfield Asset Management, which manages $163.2 million. Prima Capital Advisors manages a $518.9 million commercial mortgage portfolio.
Separately, the system increased its internal S&P 500 index fund to 32% of its $4.2 billion domestic equity allocation, cutting active small-cap value and smidcap growth to 5% each, from 6%, Mr. Kushner confirmed.
The equity portfolio is already underweight and SFERS may not need to make any further changes to this portfolio, Mr. Kushner said.
The changes are a result of a yearly subasset class review and a follow-up on a new equity allocation that was approved in June.
The board also approved investing $30 million in Knightsbridge Venture Capital VII, an early-stage venture capital fund of funds.