Arizona Public Safety Personnel Retirement System, Phoenix, is decreasing its target allocations to fixed income and domestic equities, and increasing targets to real estate, private equity, global tactical asset allocation and real assets, confirmed James Hacking, administrator of the $7.3 billion pension fund.
The biggest change is in fixed income, with a new target of 8%, down from 12%. The pension fund's target to fixed income had already been reduced to 12% from 20% at the beginning of the current fiscal year as a result of an asset allocation study.
Mr. Hacking said in a telephone interview that the fund is lowering its target to fixed income because executives expect at some point interest rates will begin to rise.
The target to domestic equities was also lowered to 17% from 18%.
Targets that will be increased are real estate, to 11% from 10%; GTAA, 10% from 8%; private equity, 10% from 9%; and real assets, 8% from 7%.
Targets that remain unchanged are 14% international equities; 12% credit opportunities; 4% each, absolute return and risk parity; and 2% short-term investments (cash).
The changes are effective July 1, the beginning of the pension fund's next fiscal year.
Mr. Hacking said there are no specific plans yet to implement the changes. The pension fund is always screening potential managers, he said. No managers will be terminated as a result of the changes in target allocations.
Investment consultant NEPC assisted.