Pennsylvania State Employees’ Retirement System, Harrisburg, increased its long-term targets to fixed income and equity, and lowered target allocations to alternatives as part of a new strategic investment plan.
Officials at the $24.4 billion system adopted the plan to meet the liquidity needs arising from a projected increase in benefit payouts to $4 billion by 2020, up from $2.6 billion in 2011, according to a news release from PennSERS.
The long-term target allocation to fixed income was raised to 26% from 17.5%; and equity was increased to 39% from 30%. The long-term target for private equity and venture capital drops to 15% from 24.5%; absolute return (including hedge funds of funds) drops to 9% from 15.5%; and real estate drops to 8% from 9.5%.
The target allocation to inflation-protected securities (including commodities) will remain at 3%.
No short-term manager changes are planned as a result of the target shifts, which will be made gradually by 2015 and are subject to annual review, spokeswoman Pamela Hile wrote in an e-mailed response to questions.
“This is a measured process that will be done through cash flows and distributions,” she wrote.
Separately, the system reported an overall investment return of 5.2% for the quarter ended Sept. 30. International equity was the top performer at 15.7%, followed by global equity at 15.1%. Other asset class’ returns included inflation-protected securities, 12.9%; domestic equity, 11.2%; fixed income, 5.1%; absolute return, 2.3%; venture capital, 0.8%; private equity, 0.5%; and real estate, 0.1%.