Iowa Municipal Fire and Police Retirement System, West Des Moines, is considering making allocations to defensive equities and bank loans, both new asset classes for the $2 billion pension fund, said Terry Slattery, executive director.
Investment consultant Summit Strategies Group plans to make a presentation to the board Aug. 29 for educational purposes and might bring in Clifton Group, whose services include defensive investment, to assist, Mr. Slattery said.
The strategy includes selling out-of-the-money puts and calls on an equity portfolio, such as an index fund, to add incremental income and diversification, Mr. Slattery said.
The system's only index investment is a $10 million MSCI ACWI fund, managed by State Street Global Advisors and used for liquidity.
In addition, the board plans to look at bank loans later this year or early next year “to further diversify and reduce risk and still get the 7.5%” actuarial assumed rate of return on the system's total assets, Mr. Slattery said.
The board hasn't determined how much it would allocate to defensive equities or bank loans, Mr. Slattery said.
The board has not set a timeframe for making decisions on allocations and searches for defensive equities or bank loans managers.