Trustees of the Florida State Board of Administration, Tallahassee, on Thursday approved changes to its target asset allocation for the $138.9 billion Florida Retirement System defined benefit plan, according to a webcast of their meeting.
The changes are:
- fixed income to 18% from 24%;
- global equity to 53% from 52%;
- real estate to 10% from 7%;
- private equity to 6% from 5%; and
- strategic investments, which consists of hedge funds, distressed debt, infrastructure and opportunistic strategies, to 12% from 11%.
Cash will stay at a 1%.
The changes, recommended by FSBA staff because of concern about the risk of rising interest rates, won't result in changes with investment managers.
In addition, FSBA trustees approved adding custom target-date funds as an investment option for the first time in the FRS' $8.2 billon 401(a) plan. As part of that change, the trustees approved reducing the number of active investment options to use more multimanager approaches.
The 401(a) changes will prudently expand participants' choices and simplify participants' investment decision-making, Ashbel C. Williams Jr., FSBA executive director and chief investment office, told trustees. The FSBA's $171.7 billion in assets includes the FRS' two plans.
FSBA hired consultants Hewitt EnnisKnupp and Mercer to assist the FSBA in creating the target-date funds, said John Kuczwanski, FSBA communications manager. Because the project contract “was minimal,” the FSBA was able to seek bids without issuing a public notice for an invitation to negotiate. Hewitt EnnisKnupp and Mercer have existing investment consulting relationships with the board. The FSBA plans to put together the target-date funds using the 401(a)'s existing investment options and managers, Mr. Kuczwanski said.
The 401(a) changes will be effective July 1.
The FRS DB plan had a total return of -2.98% year to date through Feb. 5, outperforming by four basis points the total return of its customized benchmark, Mr. William told trustees. For the fiscal year to date, from July 1 through Feb. 5, its total return was 7.73%, 19 basis points ahead of its benchmark, Mr. Williams said.