Howard County Retirement Plans, Ellicott City, Md., adopted a new asset allocation that increases targets to public equity overall and private equity, and reduces the target to core fixed income.
The joint committee for the two retirement plans approved the changes at its Jan. 28 meeting following an asset allocation review by investment consultant NEPC, recently released meeting minutes show.
The targets to domestic large-cap equities, emerging markets equities and domestic smidcap equities were raised to 22%, 6.5% and 5.5%, respectively, from their respective former targets of 19%, 5% and 4%, and the target to private equity was raised to 13% from 10%. The international developed markets equity target was lowered to 11% from 12%.
The target to core fixed income (constrained to U.S. Treasuries) was dropped to 9% from 20%, while a new target of 4% to high-yield bonds was created.
The targets to private debt, absolute-return fixed income, emerging markets debt (local currency) and Treasury inflation-protected securities remain unchanged at 5%, 4%, 4% and 2%, respectively.
The committee also approved a slight decrease in the target to core/non-core real estate to 4% from 5%, while the targets to hedge funds and private real assets remain unchanged at 8% and 2%, respectively.
According to meeting minutes, the changes will increase the pension funds' 10-year expected return to 5.9% from 5.3% and its 30-year expected return to 6.9% from 6.4%. While the new asset mix has a higher expected volatility than the previous mix, NEPC said it remains in line with the pension funds' peers.
As of Dec. 31, the actual allocation was 26.2% domestic equities, 22.2% core fixed income, 11.7% private equity, 10.8% international developed markets equities, 10.3% hedge funds, 6.5% emerging markets equities, 3.9% emerging markets debt, 3.5% real assets, 3.2% absolute return fixed income, 1.6% cash and the rest in private debt.
The Howard County Retirement Plan and the Howard County Police and Fire Employees' Retirement Plan have a combined $1.3 billion in assets.
Wanda S. Hutchinson, the county's human resources administrator, referred questions to the minutes.