Kern County Employees’ Retirement Association, Bakersfield, Calif., set new cash, private markets and hedge fund targets as part of an asset allocation change for the $2.46 billion system.
The association set a 10% target for private markets, up from a 6% private equity allocation; 5% for hedge funds, down from a 6% allocation it had in absolute returns, which had been invested in hedge funds; and a 4% allocation for liquid and cash equivalents, up from zero.
The association also increased its targets to real assets to 15% of assets from 10%.
Targets also changed for domestic equities and international equities to 22.5% each from 25%, fixed income to 17% from 22%, and high-yield bonds to 4% from 6%.
The new asset allocation is expected to result in searches for new private equity, real asset and hedge fund-of-fund strategies, according to a memo to the board by Eileen L. Neill, managing director at Wilshire Associates, the association’s general consultant. Wilshire expects to propose an asset allocation implementation plan at the association’s June meeting.
Wilshire recommended increasing the association’s total equity exposure, which includes private equity, to 55% from an actual total equity allocation of 54% of the total portfolio to “modestly increase returns and reduce funding cost over time with greater benefit security.”
It should take from 18 months to two years to switch to the new asset allocation, including adding new strategies, Ms. Neill’s memo states.