Minnesota State Board of Investment, St. Paul, plans to look at broadening its investment approach to its 45% U.S. equity and 15% international equity target allocations to allow the board’s staff to look at global equity managers beyond its current style boxes.
Mansco Perry III, the board’s executive director, told the board’s investment advisory committee Tuesday that the investment staff at the board, which oversees $80 billion in state pension and other assets, could come up with rules and procedures for weighting the three sectors in global equity — domestic, developed markets and emerging markets — “and look at global equity as one program with distinct return and risk characteristics,” Mr. Perry said.
“Now we fit all our domestic equities into nice, neat boxes,” Mr. Perry said. “My thinking is, if we’re more flexible with managers that interest us, we can look at them. I don’t see these changes as truly monumental.”
“There are two things we watch for,” Mr. Perry said. “We watch how managers perform, but more importantly, how will you put together a manager roster. Maybe we can give that a little more attention.”
One issue that would need to be looked at would be how to weigh global market capitalization.
“Other (pension funds) do that, but I don’t know how closely they stick to it,” Mr. Perry said. “We could make the benchmarks more sophisticated and excessive, but I’m not sure that’s the answer.”
Mr. Perry said there wouldn’t be wholesale changes in equity investments. “I think of the review as more of the margins,” he said. “We’re not looking to tear it all down. Like I’ve said before, it’s not broken so we don’t need to fix it.”
No timetable was set for the review, though Mr. Perry said the board would be conducting an overall asset allocation study within the next four to five quarters.