State of Wisconsin Investment Board, Madison, is undertaking an asset allocation study as a result of lowering the expected investment return assumption to 7.2% from 7.8%, said Vicki Hearing, public information officer.
“This (study) will be fairly deep because the assumption has changed,” Ms. Hearing said.
She said it is too early to tell what asset class changes might result from the study.
The system’s current allocation is 55% equities, 26% fixed income, 6% each for real estate and private equity, 3% each for Treasury inflation-protected securities and a multiasset portfolio, and 1% strategic active risk.
SWIB postponed an allocation review last October in anticipation of potential changes to the assumed return, adopted by the Wisconsin Department of Employee Trust Funds, fiduciary for the Wisconsin Retirement System. SWIB oversees the system’s $79.8 billion in assets.
Gabriel Roeder Smith, actuary for the Department of Employee Trust Funds, recommended the change in the assumed expected return. In its report, the actuary said the retirement system “is unlikely to achieve” the 7.8% assumption, estimating a 41.1% probability of exceeding it over 20 years.
Strategic Investment Solutions, the board’s investment consultant, is scheduled to present the allocation study to the board May 10-11.