Pennsylvania Public School Employees' Retirement System, Harrisburg, approved a new strategic asset allocation that includes an increased target to equities and decreased focus on fixed income and private equity.
The new allocation for the $59 billion pension fund, approved Thursday, is as follows: equities, 27% (up 8 percentage points from its current target); public fixed income, 27% (down 5 percentage points); public real assets, 17% (unchanged); private equity, 12% (down 3 percentage points); private real assets, 11% (up 2 percentage points); private credit and absolute return, 8% each (both down 2 percentage points); cash, 3% (down 3 percentage points); and explicit leverage -13% (up 5 percentage points).
The changes to public markets allocations are expected to be fully implemented by April 1, 2021, while changes to private markets allocations will occur over the next three years.
The PennPSERS board also adopted a new investment protection program. The tail-risk mitigation will serve as a hedge to protect the fund from investment losses if markets drop dramatically, as they did at the beginning of the COVID-19 pandemic earlier in the year.
The program will be managed by both the PennPSERS' investment team and external managers to be determined later.