Trustees of the Indiana Public Retirement System, Indianapolis, approved a $1.4 billion increase in the allocation to Bridgewater Associates All-Weather II risk-parity fund from the system's $36.7 billion defined benefit plan, during a meeting Friday.
The additional allocation brings the total invested in the risk-parity fund to $3.7 billion to meet a new 10% target allocation of the system's defined benefit plan.
Trustees approved INPRS' staff recommendation to increase the system's investment in the Bridgewater fund to up to 15%. Prior to the increase, Bridgewater's All Weather II fund represented 6.2% of total DB plan assets.
Funding for the increase in the Bridgewater is to come from the change in the system's risk-parity allocation to 20% from 12% that trustees approved at their May 7 meeting, INPRS spokesman Dmitri Kyser said in an email.
INPRS' investment team has discretion over manager selection and assets under management, but trustee approval was needed for the increase in Bridgewater All Weather II fund because with a 10% weighting of total DB plan assets, the Bridgewater fund will exceed the system's 6% limit for individual manager portfolios. Staff explained in the board report that the All Weather II fund's assets temporarily exceeded the 6% limit because of performance.
Increasing the allocation to the All Weather fund will decrease the blended management fee for INPRS from 0.261% to 0.257%, system staff said in the report.
"Given the level of conviction in Bridgewater and expected fees, the staff believes increasing Bridgewater's risk parity allocation to 10% of the DB Plan is better and less expensive compared to adding a new risk-parity manager to the plan," the report said.
Bridgewater's assets under management in four funds for INPRS will total $4.8 billion or 13% of defined benefit assets from 9.2% prior to the change in the All Weather fund, making the firm INPRS' largest DB plan manager, followed by Pacific Investment Management Co. (11.3%) and RhumbLine Advisers (11.1%).