Seattle City Employees' Retirement System increased its target allocations to core fixed income, infrastructure and private equity, and eliminated its target to diversifying strategies.
The $3 billion pension fund's board of administration approved increasing the target to core fixed income to 18% from 16%, private equity to 11% from 9% and infrastructure to 4% from 3% at its Dec. 12 meeting, confirmed Jason Malinowski, chief investment officer, in an email.
Funding for the target hikes comes from the elimination of the pension fund's 5% target to diversifying strategies. As of Sept. 30, the actual allocation to diversifying strategies as 1.7%.
The board on Dec. 12 also voted to redeem its $51 million investment in a customized long/short equity portfolio managed by AQR Capital Management, the sole portfolio in the diversifying strategies asset class.
The pension fund originally invested in the customized fund, which invested in both the AQR Delta and AQR Style Premia strategies, in 2016.
The investment staff recommended eliminating the asset class because it "may be less suitable because its goals of dampening short-term volatility and generating a return in excess of cash are not particularly well-aligned with SCERS' long-term horizon and long-lived liabilities" and "there may be opportunities to employ similar actively managed strategies at lower cost in public equity or other public market asset classes," said an Oct. 31 memo to the pension fund's investment committee.
Mr. Malinowski said the elimination of the target and redemption from AQR were not performance-related.
Targets that remain unchanged are 48% public equities, 12% real estate and 7% credit fixed income.
As of Sept. 30, the actual allocation was 51.5% public equities, 19.1% core fixed income, 10.7% real estate, 8.6% private equity, 7.1% credit fixed income, 1.7% diversifying strategies, 1.2% infrastructure and the rest in cash/other.