Texas Teacher Retirement System, Austin, adopted a new strategic asset allocation at its board meeting Thursday that raises the allocation to private markets, adds a 5% allocation to risk-parity strategies, and slightly cuts the allocation to directional hedge funds.
A periodic strategic review of the $130.2 billion pension fund's asset allocation concluded “the trust is currently well-positioned” to produce the 8% actuarial rate of return over 20 years “without unacceptable risk of intermediate-term downside volatility,” said Howard J. Goldman, a TRS spokesman, in an e-mail.
Mohan Balachandran, a TRS senior managing director, told trustees during the meeting that “no major changes seem necessary or appropriate at this time,” meeting materials showed.
TRS' new asset allocation reduces the broad global equity category to 57% from 61% and stable value to 16% from 18%; increases the real-return portfolio to 22% from 21%; and adds the 5% risk-parity allocation, the board meeting materials showed.
On a more granular level, in addition to the new risk-parity allocation, changes are:
- real assets to 16% from 13%;
- private equity to 13% from 11%;
- U.S. large-cap equity to 16% from 18%;
- non-U.S. developed market equity to 13% from 15%;
- emerging markets equity to 9% from 10%;
- directional hedge funds to 4% from 5%;
- U.S. Treasuries to 11% from 13%; and
- global inflation-linked bonds 3% from 5%.
Unchanged are U.S. small-cap equity, 2%; stable value hedge funds, 4%; energy and natural resources, 3%; and cash, 1%.
