The University of California Board of Regents approved changes to the asset allocation of its $70.2 billion pension plan, which includes a new target to private debt and cutting its hedge fund target by more than half.
The board approved the recommendations of the university's investment committee, UC Investments staff and investment consultant Cambridge Associates at its meeting Thursday, according to a webcast of that meeting.
The changes in the target allocation were recommended to improve medium- and long-term return prospects, according to materials from the investment committee's Tuesday meeting. The portfolio's expected 10-year return increases to 6.2% from 5.8% as a result of the changes, according to the materials.
Changes to the asset allocation are: Creation of a 3.5% target to private debt, reduction of the target to core fixed income to 13% from 15%, hedge funds to 3.5% from 10%, emerging markets debt to 1.5% from 2.5%, and increasing targets to global public equities to 53% from 50%, private equity to 12% from 10% and real assets to 4% from 3%. The targets to real estate and high-yield fixed income will remain unchanged at 7% and 2.5%, respectively.
The changes "reduce the allocation to lower returning assets and increase the allocation to asset with higher return prospects, while limiting risk through diversification and the use of long-term private assets," according to investment committee meeting materials.