The Wisconsin Retirement Systems $3.6 billion all-equity variable fund could be closed to new participants because of its 39% investment loss in 2008, but an allocation restructuring to reduce risk is not being considered at this time, said Vicki Hearing, Wisconsin Investment Board public information officer, and Matthew Stohr, Wisconsin Department of Employee Trust Funds spokesman.
Both actions closing the fund to new participants and any change from a 100% equity allocation would require legislation.
State Sen. Robert Wirch, co-chair of the Joint Survey Committee on Retirement Systems, is drafting a bill to close the fund to new participants, said Jennifer Bishop, committee clerk, although she couldnt say whether it would be introduced.
Mr. Stohr said: The ETF board decided from a design policy standpoint that the fund is not in the best interest of members and recommended the Legislature close the variable fund to new members. The board didnt ask for a change in allocation.
The bill wouldnt affect existing variable fund participants, he added. About 20% of the Wisconsin Retirement System members participate in the variable fund.
In a Feb. 26 presentation to a Wisconsin Legislative Council symposium, David Stella, ETF secretary, said, SWIB analyzed the variable fund structure and concluded asset allocation changes were needed.
But Mr. Stohr and Ms. Hearing said an allocation change isnt being considered by ETF, which administers the $58.6 billion retirement system, or SWIB, which oversees the investments. Both are in Madison.
I dont anticipate (the allocation) will change, Mr. Stohr said.
The earliest SWIB would consider a change, if it does so, would be in October when it reviews it target allocation, Ms. Hearing said.
The variable funds allocation is 69% domestic equity, 30% international equity and 1% in a multiasset fund for liquidity, Ms. Hearing said. It is invested in a mix of active and passive portfolios, run by both internal and external managers. State statute requires the all-equity allocation and making the fund available to participants.
The variable fund investment returns by law must be fully recognized each year, causing its annuities this year to drop 42%, including an annuity administration cushion. The drop is the largest ever for the fund, according to Mr. Stellas presentation.