Florida Retirement System for the first time will invest 6% of its assets in hedge funds, 2% in infrastructure and combine U.S. and international equities into a single global equity asset class under changes approved by the Florida State Board of Administration's trustees Tuesday.
Trustees also approved moving more of the $109.5 billion Tallahassee-based system's money into internal management and increasing its passive equity and fixed-income allocations, all designed to lower costs and risk. In fixed income, it is also designed to raise liquidity.
The changes are the result of an asset/liability study presented Monday by Ennis Knupp, a board consultant.
Under the new targets, FRS' hedge fund allocation would consist of 2% each to absolute-return, long/short equity, and open mandate strategies.
Cambridge Associates, FSBA's hedge fund consultant, will assist in searching for hedge fund managers expected to be through invitation rather than RFPs. Information was not available by press time on whether there would be any infrastructure searches.
In addition, the new allocation would raise the private equity target to 5% from 3.5% and debt-oriented funds to 3% from 1.8%. In addition, the new allocation includes commodities and timberland, although their targets were not set.
To fully implement the new targets, the FSBA would have to seek legislative approval to raise the statutory 10% limit on alternative investments, defined as private equity, venture capital, distressed securities and hedge funds.
The new allocation targets a 52% allocation to global equity, replacing the existing allocations of 37.4% to domestic equity and 20% to non-U.S. equity.
The board, also based in Tallahassee, oversees a total of $133.9 billion in assets.