Spokane (Wash.) Employees’ Retirement System is overhauling its asset allocation, creating new targets to total-return fixed income, high yield and opportunistic credit, and eliminating commodities and global fixed income, said Phillip Tencick, retirement director.
Mr. Tencick said the pension fund’s investment consultant, Hyas Group, conducted an asset allocation study. Minutes from the June 21 board meeting said the consultant recommended the changes to improve return/risk outcomes.
The $266 million pension fund created targets to total-return fixed income, opportunistic credit and high yield of 10%, 7% and 5%, respectively, and eliminated its targets of 15% to global fixed income and 4% to commodities. As a result, Pacific Investment Management Co. is being terminated from a $13 million international fixed-income portfolio and an $11 million commodities portfolio.
The pension fund also created targets to specific equity styles: 21% to domestic large-cap equities, 15% to international large cap, 11% to domestic smidcap, 4% to international smidcap and 3% to emerging markets equities. The total 54% equity target is an increase from the Spokane pension fund’s previous 50% target to global equities, without specific breakouts.
Also new for the pension fund is a 7% target to long-biased hedge funds. It previously had a 14% target to long/short equities and special opportunities. While the target to special opportunities under the new allocation is zero, up to 10% is permitted.
Also, real estate increases to 9% from 6%, and absolute return drops to 8% from 10%. A 1% target to cash is being eliminated.
Hyas Group will present a timeline for implementation of the new asset allocation at the pension fund board’s July 27 meeting. Mr. Tencick said the pension fund does not issue requests for proposals.
As of March 31, the actual allocation was 49.9% global equity, 14.3% long/short equity and special opportunities, 12.9% absolute return, 12.1% global fixed income, 6.5% real estate, 3.8% commodities, and the remainder in cash.