Colorado Public Employees’ Retirement Association, Denver, is hiking targets to private equity, private debt, real assets and real estate and lowering its targets to public equities, hedge funds and opportunistic investments.
The $64.6 billion pension fund’s board approved the changes at its Sept. 20 meeting as the result of an asset-liability study, according to a Sept. 26 news release.
COPERA conducts asset-liability studies every four or five years and last conducted such a study in 2019. The targets to private equity and real estate are being increased to 10% each from 8.5% each and the target to global equities is being dropped to 51% from 54%.
The targets to fixed income and alternatives remain unchanged at 23% and 6%, respectively.
Within the alternatives asset class, the pension fund is increasing its allocations to real assets and private debt and reducing allocations to hedge funds and opportunistic investments, according to the news release. The release did not provide specific information on how much each allocation within alternatives is changing.
“Asset allocation is the single largest driver of investment returns, and I appreciate the attention and care the board has given to analyzing and updating our strategic asset allocation,” said Amy McGarrity, chief investment officer and chief operating officer, in the news release. “These new long-term targets are expected to help reduce risk in the portfolio and ensure we can continue to provide the lifetime retirement income that so many of Colorado’s public employees rely on.”
In a July 31 interview with Pensions & Investments, McGarrity had anticipated raising targets to private equity and real estate by 1.5 percentage points each but noted that COPERA’s ability to raise targets to illiquid investments is limited.
“We are slightly underweight relative to peers,” she said at the time, “and that is a result of not only our internal management capability and demonstrated added value there, but also our liquidity profile may be a little more than some of our peers. We are a very mature fund with a net outflow in excess of 2% per year.”
The pension fund reported a funding ratio of 66.2% as of Dec. 31 in its latest actuarial valuation.
As of June 30, the actual allocation was 56.2% global equities, 18.4% fixed income, 9.7% real estate, 8.5% private equity, 6.9% alternatives and 0.3% cash.
