The $204 billion Teacher Retirement System of Texas, Austin, relies on its longevity to ride out periods of market volatility, said CIO Jase Auby in an email.
“Our time horizon usually allows us to not respond to geopolitical events as their impact on markets tends to dissipate on a six- to 12-month time horizon.”
“On the other hand, we are paying attention to rising global inflation and are positioned with a small tilt addressing that risk at this time,” he said.
Mr. Auby declined to say which asset class was increased to defray the impact of inflation.
Other pension fund officials said they made asset allocations changes in 2021 and 2022 with increases to private equity, real assets, risk parity and other strategies that likely will help to buoy their portfolios in volatile market and inflation conditions.
Massachusetts Pension Reserves Investment Management Board, Boston, relies on diversification within the $104.3 billion defined benefit plan to generate returns, said Michael G. Trotsky, PRIM executive director and CIO, in an email. “PRIM is well positioned to navigate these volatile markets,” he said.
PRIM’s board approved a new asset allocation for 2022 during a Feb. 17 meeting that decreased global equity to a range of 33%-43% from 34%-44% in 2021 and increased the target range for private equity to 12%-18% from 11%-17% the prior year.
Mr. Trotsky said the new asset allocation “reflects an investment philosophy that has consistently performed strongly in both up, and perhaps more importantly, down markets.”
Investment officers of the $41 billion Indiana Public Retirement System, Indianapolis, believe that “asset allocation is the most important determinant of long-term investment results,” an emailed statement said.
In May 2021 “the board of trustees approved a new asset allocation that is expected to meet the retirement fund’s target rates of return net of fees, while minimizing risk. INPRS is managing the defined benefit plan within the ranges of the strategic asset allocation,” staff said in the statement.
On the plus side, INPRS’ new asset-class lineup raised the risk-parity allocation to 20% from 12%; fixed-income inflation-linked bonds were raised to 15% from 7%; the real estate target rose to 10% from 7%; commodities were bumped up to 10% from 8%; and the private markets target rose slightly to 15% from 14%.
The target for the system’s fixed-income ex-inflation linked bonds remained at 20%. Absolute return was reduced to a 5% allocation from 10% and public equity was brought down to 20% from 22%.
INPRS’ asset allocation totals 115% because of leverage.