Dallas Police & Fire Pension System will redeem investments with risk-parity managers PanAgora Asset Management and AQR Capital Management as part of the pension fund’s restructuring of its global asset allocation portfolio, according to a recently released meeting summary.
In March, the $2.7 billion pension fund voted to lower its global asset allocation target to 10% from 20% of the overall pension fund portfolio and establish a 5% risk-parity target within the GAA portfolio. As of April 15, the pension fund had $182 million, or about 6.7%, of total assets in risk parity. It did not previously have a dedicated risk-parity target.
Existing risk-parity managers Bridgewater Associates and Putnam Investments were retained, although Bridgewater’s allocation will be reduced by $20 million to help meet the new 5% target, which is lower than the previous exposure of 6.7%.
Although Bridgewater and Putnam’s fees are “slightly higher,” PanAgora and AQR’s strategies “utilize more leverage and significantly higher expected risk than their counterparts,” said a memo from investment staff on their recommendation. Officials at PanAgora could not immediately be reached for comment; an AQR spokesman declined comment.
As of April 15, the pension fund had $11.9 million invested with PanAgora, $17.2 million with AQR, $94.6 million with Bridgewater and $58.4 million with Putnam.
Assets from PanAgora and AQR will help the pension fund with some of its cash-flow needs and could be used to help fund an existing unidentified fixed-income manager, said Milissa Romero, investment analyst. Ms. Romero could not be reached for additional information by press time.
Also within the GAA portfolio, Bridgewater manages about $33 million for the pension fund in its Pure Alpha Major Markets strategy.
The staff is considering adding an additional global macro/absolute-return manager in 2017, Ms. Romero said. No RFP would be issued. The targeted allocation size is roughly 1% of total assets, or about $27 million.
