Maryland allocates $1.2 billion to emerging markets equity, debt

Maryland State Retirement & Pension System, Baltimore, added $1 billion in emerging markets equity and committed $75 million to private equity in December, officials reported at an investment committee meeting Thursday.

Baillie Gifford and Dimensional Fund Advisors, both existing equity managers, each received $500 million for emerging markets equity. Four new emerging markets allocations are also in or near legal review, including one existing manager and three new managers, investment staff reported.

The $44.2 billion pension fund also committed $75 million to PAG Asia II as part of its efforts to add to direct private equity engagement in Asia.

Separately, State Street Global Advisors was hired to manage $200 million in emerging markets hard currency bonds, as part of Maryland's new allocation for hard currency debt.

Also, the pension fund returned 1.39% in the fourth quarter, 11 basis points below its benchmark. Public equity was the best-performing asset class on an absolute basis, returning 4.6%. On a relative basis, commodities performed best, at 2.4 percentage points above its benchmark.

The pension fund returned 0.09% for the year ended Dec. 31, 87 basis points above its benchmark.

The current allocation to public equity is 39% and the target is 38%. The one-year return was -1%, compared to the policy benchmark of -2.6%.

Over the past year, private equity returned 12.54%, outperforming the benchmark's 8.28%. The current allocation is 8.8%; the target is 10%.

When asked whether the fund will use the new fee reporting template introduced by the Institutional Limited Partners Association in January, Andrew Palmer, Maryland's chief investment officer, said, “We are definitely looking forward to having this as a tool.” While it might not fit all situations, Mr. Palmer said, “it's a great place to start.”

The asset allocation as of Dec. 31, 2015, was 47.8% growth equity, 22.3% rate sensitive strategies, 12.8% real assets, 9% absolute return and 8.1% credit strategies. The target allocations through April 2016 are 47% growth equity, 20% rate sensitive strategies, 15% real assets, and 9% each absolute return and credit strategies.