Indiana Public Retirement System, Indianapolis, hired Mercer as the $30.3 billion retirement system's real estate consultant.
Mercer replaces ORG Portfolio Management, which was a finalist along with Courtland Partners and Callan Associates.
David Cooper, INPRS chief investment officer, told the system's board at a meeting Friday that Mercer was chosen, in part, because of better technology, although ORG "had performed well for the system" for the past five years.
In a presentation to the board, Mercer made preliminary recommendations that INPRS increase its core real estate investments, now accounting for 43% of its total 5.5% real estate allocation, as well as add European and Asian real estate investments for diversification and global real estate investment trusts for portfolio liquidity. Mr. Cooper said the system “would definitely take that under advisement.”
Separately, the system will move ahead during the next quarter with plans to conduct an asset-liability study and analyze trading costs, all part of a three-year strategic plan approved by the INPRS board in June.
Also, the system returned 13.7% on its investments in the 12 months ended June 30, the end of its fiscal year, topping its custom benchmark's 13.11% return. Its three-year return was 6.66%; five years, 10.5%; and 10 years, 5.68%. The corresponding benchmark returns were 6.81%, 9.89% and 5.71%, respectively. All multiyear returns are annualized.
Fiscal-year 2014 returns were spurred by global equity, which returned 22.49%, followed by private equity at 19.63%; risk parity, 16.69%; commodities, 12.79%; absolute return, 10.34%; real estate, 10.24%; non-inflation-linked fixed income, 7.05%; inflation-linked fixed income, 5.37%; and cash, 0.94%.
INPRS' asset allocation as of June 30 was 23.6% global equity, 21.1% ex-inflation-linked fixed income, 12.7% private equity, 10.2% risk parity, 9.4% inflation-linked fixed income, 8.7% absolute return, 7.8% commodities, 5.5% real estate and the remainder in cash.
