A strategic investments allocation implemented by the Florida State Board of Administration is providing the risk mitigation it was created to do.
Strategic investments has an allocation of 6.7% of the $149.3 billion Florida Retirement System defined benefit fund, whose investments the Tallahassee-based FSBA oversees as part of its $182.2 billion in total assets.
The board targets strategic investments to reduce risk, provide diversification and serve as an inflation hedge to generate an annual 5% real return, Trent Webster, senior investment officer, strategic investments and private equity, noted in a presentation to the FSBA investment advisory council June 22.
From June 30, 2010, when strategic investments was constituted in its present form, through March 31, 2015, the fund's volatility as measured by annualized standard deviation was 8.16%, he said. Without the allocation, volatility would have been 8.48%, he added.
Strategic investments returned 12.1% during the period, outpacing its 8.2% custom benchmark return and its objective, Mr. Webster added. During the period, the consumer price index plus 500 basis points was an annualized 6.5%
The asset class includes hedge funds, activist equities strategies, debt, real assets, royalties and investments in general partner managers.
