Kentucky Employees Retirement System, Frankfort, is selling $30 million in investments to raise money to pay pension benefits, confirmed Brent Aldridge, interim chief investment officer at the $4.7 billion state employees plan.
He said that as of June 30, 2009, the state employees system was about 45% funded, with $10.6 billion in liabilities.
“Our state plans are in a negative cash flow situation” because of a shortage of funding at the state level and poor investment returns, Mr. Aldridge said in a telephone interview. He said the system has to sell investments from asset classes that are overweight positions every two or three months to make the monthly benefit payments, which run about $60 million to $70 million per month.
“It’s not causing us great alarm at this point, but it is a concern,” Mr. Aldridge said, noting that paying benefits is not usually an issue when markets are performing well. “If this keeps going on, it’s going to be an issue.”
He said that at its August investment committee meeting, the system instituted a new asset allocation strategy that focuses on more short-term liquid investments.
The new asset allocation cuts U.S. equities to 20% from 30%; international equities to 24% from 27%; and absolute return to 10% from 5%. It also creates a non-U.S. fixed-income class and high-yield fixed income, both at 5% and a real-return class at 10%, which will include an existing 5% TIPS allocation. Core fixed income, private equity and cash were unchanged.
Mr. Aldridge said consultant R.V. Kuhns will be providing investment recommendations in the coming months for investments in the new asset classes.
Separately, the Kentucky Retirement Systems is searching for a CIO to oversee its $13 billion in pension and insurance funds, according to a job posting on the website of the National Association of State Retirement Administrators.
The CIO manages a staff of seven division directors and investment analysts, and reports to the systems’ executive director and investment committee. The systems’ assets are primarily invested and managed by external managers.
The successful candidate will succeed Adam Tosh, who left the system in July to become managing director, investment solutions at Rogerscasey.
The job posting is available at http://www.nasra.org/career.htm#ky. Applications can be sent to Elena McCall, EFL Associates assistant vice president, at [email protected]
Mr. Aldridge said a candidate selection is expected by the end of the year.