South Carolina Retirement System Investment Commission adopted a new asset allocation for the $29.3 billion state pension fund at a meeting Friday in Columbia.
The new allocation, effective July 1, increases the fund's opportunistic category by two percentage points at the expense of its diversified credit allocation, meeting documents show.
Unchanged are policy targets to global equities (public and private equities), 40%; conservative fixed income (core and global fixed income, cash/short duration), 15%; and real assets (commodities, real estate, infrastructure, other credit), 8%.
The opportunistic allocation (low-beta hedge funds, GTAA/risk parity) increases to 20% from 18%, while diversified credit (mixed and other credit, emerging markets debt, private debt) drops to 17% from 19%.
The state pension fund is administered by the South Carolina Public Employee Benefit Authority, Columbia, while its assumed rate of return — 7.5% over 30 years — is determined by the state General Assembly.
The new asset allocation is expected to produce slightly better returns than the previous mix, depending on the inflation scenario, said Aon Hewitt Investment Consulting in board materials.
Over a 10-year period, the new asset allocation is expected to return 6.35% if inflation averages 2.1% and 6.77% if inflation averages 2.75%, according to Aon Hewitt. The previous allocation would return 6.31% and 6.74%, respectively, using the same inflation assumptions.
Over a 30-year period, the new asset allocation is expected to return 6.63% if inflation averages 2.1% over the time period and 7.33% if inflation averages 2.75%. The previous allocation would return 6.6% and 7.31% over the same time frame using the same inflation assumptions.