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Pension Funds

San Jose Police & Fire eliminates GTAA, long/short equity target allocations

Pension fund also increases fixed-income allocation

San Jose (Calif.) Police & Fire Department Retirement Plan has adopted a new asset allocation, eliminating its target allocations to global tactical asset allocation and long/short equities and significantly increasing global core fixed income, among other changes, said recently released board meeting minutes.

The $3.6 billion pension fund eliminated its 10% target for GTAA, 2% target for long/short equity and 1% for cash, and increased targets for global core fixed income to 20% from 12%, and non-investment-grade fixed income and emerging markets debt to 4% each from 2% each. The pension fund also increased targets for global equity to 34% from 29% and real estate to 8% from 7%, and reduced targets for private debt to 8% from 11%, commodities to 6% from 7% and infrastructure to 2% from 3%. Targets of 8% for private equity and 3% each for global macro strategies and relative value/arbitrage strategies remain unchanged.

As a result of the changes, the pension fund terminated GTAA managers Aberdeen Standard Investments, Pacific Investment Management Co., Grantham, Mayo, Van Otterloo & Co. and Northern Trust Asset Management from their respective portfolios of $109 million, $103 million, $75 million and $75 million.

The pension fund also added $60 million to an active global value equity strategy managed by Artisan Partners (APAM), giving it $206 million, and $50 million to a passive large-cap equity portfolio managed by Northern Trust Asset Management, giving it $142 million. Also the pension fund added $245 million and $175 million, respectively, to a passive global fixed-income portfolio and passive domestic fixed-income portfolio, both managed by BlackRock (BLK), giving the two strategies a total of $282 million and $194 million, respectively.

The pension fund also removed $85 million from an overlay private debt portfolio managed by Russell Investments, leaving it with $78 million, and added $15 million to an overlay real estate portfolio also managed by Russell, giving it $69 million. The pension fund also removed $45 million from a commodities portfolio managed by Credit Suisse Asset Management, leaving it with $148 million, and $35 million from a passive global infrastructure portfolio managed by Rhumbline Advisers, leaving it with $56 million. Also, the pension fund moved $18 million from its cash account, leaving it with $5 million.

As of Dec. 31, the actual allocation was 11.6% international equities, 10.1% GTAA, 8.8% global equities, 8.2% private debt, 8% private equity, 7.2% commodities, 7% real estate, 6.9% absolute return, 6.5% global core fixed income, 4.7% emerging markets debt, 4.6% non-investment-grade credit, 4.4% emerging markets equities, 4.2% domestic equities, 3.3% alternative equities, 3% infrastructure and the rest in cash.

The reasons for the changes were not provided. Prabhu Palani, chief investment officer, could not be immediately reached to provide further information.

Investment consultant Meketa Investment Group assisted.