University of Missouri System, Columbia, increased the targets in its $1.7 billion endowment pool to private equity, private debt and real estate and reduced its exposure to fixed income following an asset allocation study.
The system's board of curators approved the changes at its Feb. 4 meeting, said Thomas F. Richards, chief investment officer and senior associate vice president for finance.
The endowment's targets to private equity, real estate and private debt were increased to 15%, 10% and 7%, respectively, from their respective prior targets of 10%, 8% and 3%, while the target to inflation-linked bonds was dropped to 10% from 15% and the target to sovereign bonds (U.S. Treasuries) was dropped to 8% from 14%.
Also, the target to risk balanced investments was increased to 12% from 10%, while the target to commodities was dropped to 3% from 5%.
The target to global equities remains unchanged at 35%.
The asset allocation study was conducted by general investment consultant Verus Advisory. According to Feb. 4 board meeting materials, the new target allocation provides a 113-basis-point increase in mean expected return, with no change in risk-adjusted return.
The materials say the changes reflect a lower expected return in fixed income due to the Federal Reserve's moves in 2020 to drop interest rates back to near zero.
Mr. Richards would not provide actual asset allocation information. How the changes will be implemented was not provided. The presentation said the transition to the new targets "should be done in a prudent, methodical manner over a reasonable period of time as determined by investment staff."