San Diego City Employees’ Retirement System hired Allianz Global Investors to manage $200 million in a structured alpha U.S. equity S&P 500 strategy, an absolute-return/return-enhancing strategy that seeks to find excess return opportunities in the options market, according to a summary of the board actions from the $6.8 billion pension fund’s Sept. 9 board meeting.
Funding will come from reducing a $673 million BlackRock S&P 500 index fund.
Separately, the board rehired Aon Hewitt Investment Consulting as real estate consultant following an RFP launched in May. Aon Hewitt’s contract was set to expire in November. Townsend Group was the other finalist.
The board also approved discretionary consultant Grosvenor Capital Management’s 2017-2019 investment plan for the pension fund’s $426.5 million private equity and infrastructure portfolio. Under the new plan, the pension fund will reduce its commitment pace for both asset classes to a total of $380 million over the next three years ended Dec. 31, 2019, compared to $480 million per the 2016-2018 plan. The pension fund is expected to reach its 6.5% target allocation by the end of this year, which is one year ahead of last year’s schedule. It is expected to exceed its policy target from 2017 to 2019.
Grosvenor will seek to pursue a slower investment pace over the next few years, given the volatility in the SDCERS’ total portfolio since last year, according to Grosvenor’s report to the board’s Sept. 9 meeting. As a result, the so-called denominator affect, which boosted the pension fund’s private equity and infrastructure portfolios as other asset classes dropped in value, Grosvenor’s report said.
