Denver Employees Retirement Plan has increased targets to private equity, private senior debt, distressed debt and private energy following an asset-liability study, said Steven Hutt, executive director.
The $2.1 billion pension fund conducts a study every five years, and the board at its Thursday meeting approved a revised asset allocation that consists of increases in the targets to private equity, to 7% from 6%; private energy to 5.5% from 4%; private senior debt to 4% from 2.7%; and distressed debt, to 2.5% from 1.3%.
As a result of the changes, the overall target to equities will be reduced to 46% from 51%, Mr. Hutt said in a telephone interview. Domestic large cap will be reduced to 19% from 21.2% of the overall fund; international large cap to 10% from 12%; international small cap to 5.5% from 6%; and domestic small cap to 3.5% from 3.8%. The emerging markets equity target will remain unchanged at 8%.
Mr. Hutt said investment consultant Summit Strategies Group, which conducted the study, recommended the equity reductions due to projections of lower equity returns over the pension fund's 10-year horizon. Mr. Hutt added that equity targets have gradually been reduced over the past six years.
The target to core fixed income was also increased, to 11.5% from 9.5%, but that is the result of the elimination of a dedicated target of 2% to TIPS, which is managed internally and will now be integrated into the core fixed-income target, Mr. Hutt said.
Emerging markets debt also remains unchanged at 2.5%, and alternatives targets that remain unchanged are 8% real estate, 7% master limited partnerships, 5% absolute return and 1% timber.
Mr. Hutt said there are no plans to hire or terminate any managers as the result of what he said are relatively small changes.
As of Feb. 28, the pension fund's actual allocation was 22.1% domestic large-cap equities, 13% international large-cap equities, 10.4% core fixed income, 8% emerging markets equities, 7.4% MLPs, 7.3% real estate, 6.6% international small-cap equities, 5.4% private equity, 5.1% absolute return, 4.3% domestic small-cap equities, 3.7% private senior debt, 2.5% emerging markets debt, 1.6% timber, 1.2% private energy, 1% TIPS, and 0.4% distressed debt.
