San Diego City Employees' Retirement System created a new 4% allocation to managed futures as part of its 8% opportunity fund allocation, according to a summary from the board's March 8 meeting.
Officials for the $8 billion pension fund added the allocation as part of its asset allocation and portfolio structure review. The new allocation is expected to provide attractive risk-return characteristics, returns uncorrelated to traditional asset classes and downside protection in periods of market stress.
San Diego's general investment consultant is expected to recommend managers to run the new managed futures allocation at the board's May meeting.
The board also combined its two U.S. equity large cap index funds, a Russell 1000 fund and an S&P 500 fund, creating a single S&P 500 portfolio. The pension plan had $625.5 million invested in the BlackRock S&P 500 index fund and $312.3 million in the BlackRock Russell 1000 index fund as of Sept. 30. Pension officials consolidated the two strategies to simplify the portfolio. The pension plan has a 18% allocation to domestic equities.
Separately, the board lowered its discount rate to 6.5% from 6.75% for its 2018 valuation. Under the 2018 actuarial valuation, the pension plan has a 70.8% actuarial liability compared to an 71.2% actuarial liability as of its 2017 actuarial valuation.