Austin (Texas) City Employees' Retirement System hired BlackRock to manage the $2.7 billion pension fund's first strategic partnership.
Pending successful contract negotiations, BlackRock will be awarded $130 million, or about 5% of plan assets, for a multiasset portfolio, said David Veal, chief investment officer.
BlackRock will have discretion to manage the portfolio in all of the investment categories currently included in the fund's asset allocation — equities, bonds, real estate, commodities, real estate and infrastructure — within target ranges set by pension fund investment staff.
Mr. Veal said any other asset classes the pension fund may add to its allocation mix will be added to BlackRock's portfolio options.
Funding for the BlackRock hire likely will come from the termination of a $76 million master limited partnership managed by Harvest Fund Advisors and a $15 million commodity strategy run by CoreCommodity Management, Mr. Veal said. The balance will come from a reduction of $40 million from a $157 million Russell 2000 index account managed by Legal & General Investment America, Mr. Veal said.
The pension fund likely will expand its asset class lineup in the second half of 2018 based on the recommendations from an asset-liability study by RVK, the fund's investment consultant. RVK will present the report to the fund's investment committee at a May 18 meeting and the full board will consider asset allocation changes at a June 26 meeting.
High on the list of possible new asset classes are private equity, private credit and timber, all strategies that can provide additional returns to the fund, which has a funded status of 67.5% and a 7.5% assumed rate of return, Mr. Veal said.