Pennsylvania Public School Employees' Retirement System's board of trustees recently approved a new target asset allocation for the $72.5 billion fund.
Most significantly, the board raised U.S. public equities to a 21% target from 11% as of June 2021. Additionally, it eliminated the absolute-return strategy, which had an 8% target. The board also changed the fund's targeted leverage to 11% from 13%.
PennPSERS has shifted its target allocation over the years. Public equity was 27% at the end of its latest fiscal year, compared with 19% in 2017 and 15% in 2019 and 2020. Absolute return, which had a 10% target for several years, went down to 8% last June. Risk parity had an 8% target before the board cut it out completely at the end of the latest fiscal year.
PennPSERS' overall portfolio has had a strong performance. Over the 10 years ended on June 30, it had an 8% annualized return, more than 40 basis points higher than the policy benchmark. However, the absolute-return portfolio trailed its benchmark over multiple periods, including by 213 basis points in the 10-year period.
