Florida State Board of Administration, Tallahassee, could raise the upper level of its global equity allocation range to 65% from 60% to avoid rebalancing to lower-returning fixed income, said Dennis D. MacKee, FSBA communications director.
Global equities has a current actual allocation of 59% of the $131.5 billion Florida Retirement System defined benefit plan assets, which the FSBA oversees. The target allocation is 52%.
The FSBA's investment advisory council recommended the increase, while keeping the lower end of the range at 46%.
Because strong returns have raised the global equity asset allocation close to 60%, the FSBA wants to avoid rebalancing into fixed income, which currently generates a negative real return after adjusting for inflation, or rebalancing into alternatives, “which can take 'forever' to get the money to work,” Mr. MacKee said.
“This (top range recommendation) will give us flexibility,” Mr. MacKee said.
FSBA hasn't rebalanced out of global equities this year because it has used distributions to meet benefit payments to keep within the range, Mr. MacKee said.
The FSBA, which oversees a total $163.5 billion, plans to incorporate the recommendation as part of a revised investment policy statement to present to trustees for approval later this year.
The asset values are as of yesterday.