Phoenix City Employees' Retirement System may soon adopt a new asset allocation that creates new targets to absolute return and private equity, confirmed Greg Fitchet, investment manager for the $2 billion pension fund.
The board of trustees will vote on the changes, recommended by staff and investment consultant R.V. Kuhns & Associates, at its June 20 meeting.
The private equity target would be 3% and consist primarily of separate account funds of funds, Mr. Fitchet said in a telephone interview. The absolute-return target would be 15% and replace the retirement system's 10% target to long/short equities.
The target to diversified inflation strategies would increase to 8% from 5%.
The proposed changes are result of an asset allocation study conducted following a special city election on March 12. Proposition 202, which amended the investment standards, legal status and funding provisions for the pension fund, won 77% of the vote. The proposition eliminated existing investment standards that previously prevented the pension fund from investing in asset classes such as private equity, high-yield debt and some real asset classes.
Targets to broad domestic equities would be reduced to 18% from 23% and broad international equities would be reduced to 16% from 22%.
Mr. Fitchet said the next step after the board vote in June would be to discuss the changes with existing managers and take appropriate actions before conducting any searches for private equity funds of funds, inflation strategies and absolute-return strategies before the end of the year.
Targets that would remain unchanged are 20% intermediate-duration bonds, 8% non-core real estate, 7% core real estate and 5% emerging markets debt.