Pension Funds

San Diego City Employees commits to real estate debt fund, lowers assumed rate of return

CEO also announces he will retire Dec. 1.

San Diego City Employees' Retirement System committed $20 million to real estate debt fund Torchlight Debt Opportunity Fund VI, managed by Torchlight Investors, according to a recording of the board's Sept. 8 meeting.

The $8 billion pension fund has invested with Torchlight in the past.

Separately, the board voted to lower its assumed rate of return to 6.75% for the year ended June 30 from 7% and then to 6.5% for the year ending June 30, 2018. A few board members favored lowering the assumed rate of return to 6.5% right away.

"I don't want to chase alpha in highly risky investments," said board Chairman Valentine S. Hoy.

He said that earning 6.75% in a "relative safe portfolio is a unicorn, it doesn't exist" and added that the assumed rate of return should be lowered to 6.5% as soon as possible.

In response to questions, Liza Crisafi, chief investment officer, joked that she would like to see the rate of return lowered to 5%.

"We are over eight years into a bull market … It will be over at some point," Ms. Crisafi said. "We will not be able to earn 7% or even 6.5%."

Also, CEO Mark Hovey announced that he plans to retire on Dec. 1. Mr. Hovey has served as CEO for eight years. Jessica Packard, SDCERS spokeswoman, could not be immediately reached for information on plans for selecting a new CEO.

"Mark Hovey has been a tremendous leader of SDCERS. He was the right person at the right time," Mr. Hoy said in a written statement. "On his watch the system not only regained its financial strength, it made huge improvements in administration and management that launched SDCERS from the back of the pack to the top echelon of public pension funds of its size."