Howard County Retirement Plans, Ellicott City, Md., voted to eliminate its emerging markets debt local currency asset class, citing the impact of the new Trump administration.
The joint committee for the Howard County Retirement Plan and the Howard County Police and Fire Employees’ Retirement Plan approved the termination at its Feb. 19 meeting, recently released meeting minutes showed.
The termination was the result of the adoption of a new target asset allocation approved at the meeting. Changes include the creation of a new 3% target to global multisector credit, funded by the elimination of the 2% target to emerging markets debt local currency and the reduction of the target to absolute return fixed income to 3% from 4%.
In a presentation included with meeting materials, NEPC recommended the elimination of the emerging markets debt local currency portfolio because the Trump administration “appears to represent a clear headwind for emerging markets going into 2025. The potential for continued U.S. growth would likely lead to a strong U.S. dollar and higher U.S. rates, all negative for emerging markets debt.”
NEPC recommended instead that the pension fund should access emerging markets debt through a global multisector credit allocation, which would give “managers the flexibility to capitalize on the broad opportunity set while containing volatility.”
Colchester Global Investors currently manages $32 million in active emerging markets debt local currency for the retirement plans. The board did not set a vote to terminate the manager, and the minutes did not provide further information on how the plans will search for global multisector credit managers.
Other changes include raising the targets to domestic large-cap equities to 23% from 21.5% and private real assets-natural resources/infrastructure to 3.5% from 2%, and reducing targets to international developed markets equities to 10% from 10.5%, hedge funds to 6.5% from 8% and emerging markets equities to 5% from 6%.
Targets that remain unchanged are 13% private equity, 5.5% U.S. aggregate bonds, 5% each private debt and U.S. Treasuries, 4% each domestic smidcap equities and U.S. corporate bonds, 3% U.S. Treasury inflation-protected securities, 2.5% high-yield/leveraged loans and 2% each core real estate and noncore real estate.
As of Jan. 31, the actual allocation was 29.9% domestic equities, 24% fixed income, 16.7% international equities, 12.3% private equity, 8.2% hedge funds, 4.5% real assets, 3.6% private debt and the rest in cash.
