Florida State Board of Administration, Tallahassee, rejected changing the asset allocations to step up risk and boost potential return in the $13 billion Florida Hurricane Catastrophe Fund.
At an investment advisory council meeting Monday, Ash Williams, executive director and chief investment officer of the FSBA, which oversees $181.6 billion, including the hurricane fund, rejected seeking greater return for the fund due to its liquidity needs, said John Kuczwanski, communications manager.
“Given the purpose of the CAT fund, liquidity is one of the drivers of not investing in longer-term vehicles, resulting in a lower return,” Mr. Kuczwanski said.
The IAC reviewed the fund's allocation after it was challenged at the IAC's Dec. 8 meeting by Chuck Cobb, IAC vice chairman, who cited its low return. The fund's allocation consists of cash and cash equivalents in short-term high-quality instruments, all managed internally, Mr. Kuczwanski said.
The CAT fund's total return was 0.18% for the 12 months and 1.74% annualized for the 10 years, both ended Dec. 31, according to a report by Aon Hewitt, an investment consultant to the board, presented to the IAC on Monday. The CAT fund outperformed its custom benchmarks for both periods of 0.03% and 1.66%, respectively.
The reason for the fund's allocation “is, if nature goes the wrong way and we get a real blow and we need that money, we're going to need it then and we're going to need all of it, not have it tied up somewhere,” Mr. Williams said at the Dec. 8 meeting, according to its minutes.