New Mexico Public Employees Retirement Association, Santa Fe, hired Mellon Investments for a passive risk-parity index replication mandate that can be funded up to 10% of the total pension fund assets, said Kristin Varela, deputy CIO of the $15.4 billion pension fund, in an email.
In July, the board amended its strategic asset allocation, adding a new, up to 10% multirisk allocation, consisting primarily of risk-parity investment strategies. The Mellon portfolio will track a customized benchmark based on the Wilshire Risk Parity index.
The expected benefits of the new portfolio to New Mexico PERA include diversification, better risk-adjusted returns, the ability to separate alpha and beta, and prudently budget active risk in a low-cost, fully transparent investment, Ms. Varela said.
The pension fund's staff will evaluate the effectiveness of the strategy over the next 10 months, she said.
General investment consultant Wilshire Associates assisted.