The New York State Teachers’ Retirement System, Albany, added high-yield bonds as a new asset class as part of a restructuring of its target asset allocation for the fiscal year that began July 1.
“Adding U.S. high-yield bonds to our asset allocation provides an opportunity to generate excess returns while further diversifying our overall and fixed-income portfolios in a risk controlled manner,” said John Cardillo, a pension fund spokesman, in an e-mail, referring to the new 1% target allocation.
“Implementation will be gradual and will include a search for active U.S. high-yield bond managers,” he wrote. “There is no timetable at this time for this search.”
The adding of high-yield bonds was part of several fiscal 2017 asset allocation changes approved Wednesday by the $107 billion pension fund’s board.
The changes include lowering the domestic equity target to 35% from 37%; reducing the domestic fixed-income target to 16% from 17%; raising the real estate equity target to 11% from 10%; and increasing the private equity target to 8% from 7%.
Targets remained unchanged for international equity (18%), real estate debt (8%), global bonds (2%) and cash equivalents (1%).
Separately, the board committed an additional $300 million to Brookfield Asset Management in a non-discretionary separate account focused on first mortgage loans and subordinate debt. The board approved a $350 million commitment in October.
“Brookfield’s strategy is well positioned for current real estate market conditions,” wrote Mr. Cardillo.
It will add to the pension fund’s “floating-rate short-duration debt product through a relatively conservative strategy,” he wrote. Brookfield will concentrate on “high-quality U.S. properties with primary focus on office, industrial, multifamily and retail” sectors.
The pension fund has previously made four separate commitments to Brookfield.
Also, the board on Wednesday made a series of contract renewals for money managers. Each renewal is for one year, and takes effect upon expiration of the current contract.
The renewals are:
- Progress Investment Management, to manage $746 million as a manager of managers in a domestic all-cap equity strategy, effective Nov. 15;
- T. Rowe Price Group, $587 million as an enhanced equity manager, Oct. 30;
- William Blair, $559 million in international equity, Sept. 22;
- Baillie Gifford, $554 million in international equity, Sept. 15;
- Prima Capital Advisors, a $536 million separate account for commercial mortgage-backed securities, investment-grade real estate investment trust bonds, first mortgage loans and mezzanine loans, Nov. 1;
- Leading Edge Investment Advisors, $420 million as a domestic equity manager of managers, Nov. 22; and
- Cohen & Steers Capital Management, $184 million in active REITs and real estate operating companies, Sept. 13.