Orange County Employees Retirement System, Santa Ana, Calif., adopted new tactical asset allocation targets recommended by the pension fund’s general investment consultant NEPC, said Robert Kinsler, spokesman for the $11.6 billion pension fund, in an e-mail.
The new tactical target asset allocation reduces total equities and fixed income by a percentage point each to 35% and 25%, respectively, and increases alternatives by two percentage points to 40%. Within alternatives, global tactical asset allocation increased a percentage point to 7% and private equity increased a percentage point to 6%. Within fixed income, global bonds was reduced by one percentage point to 2%, domestic bonds was reduced by three percentage points to 10% and diversified credit was increased by three percentage points to 10%.
OCERS has not adopted an implementation plan, but last year’s change in tactical asset allocation targets resulted in searches.
Separately, OCERS gave final approval to a $100 million commitment to Pantheon Ventures for a private equity fund-of-funds strategy, after receiving a legal opinion that the collaborative RFP by California public pension plans did not violate antitrust laws.
The opinion by law firm Morgan, Lewis & Bockius that the joint RFP for a bundled private equity fund of funds does not violate U.S. or California antitrust laws clears the way for the other pension funds to commit capital to the strategy.
It is expected that the Pantheon investment strategy will have at least $300 million in 2014, its first year, increasing thereafter to a cap of $1 billion, the antitrust opinion notes. The strategy includes an aggregate pricing structure, designed to offer lower fees for smaller to medium-sized pension funds. Larger pension plans already have the economies of scale.
In other action, OCERS added Mondrian Investment Partners to the shortlist of managers to be considered in the ongoing exploratory search for an emerging markets equity “best ideas” strategy. The shortlist already includes Acadian Asset Management, Lazard Asset Management, Lee Munder Capital Group and OFI Global Asset Management.
“The belief is that there will continue to be significant increases in the size of the middle class in the emerging markets and that this will create additional significant discretionary spending. As such, companies in the emerging markets who cater to the middle class will see a significant growth in their business, earnings and stock prices. The best way to access that is through either small-cap or consumer-oriented strategies,” Mr. Kinsler wrote.