Kern County Employees' Retirement Association, Bakersfield, Calif., increased the target to its capital efficiency alpha pool asset class to 8% from 5%.
The $5.5 billion pension fund's board approved the change to the target at its April 13 meeting as part of an expansion of its capital efficiency program, said Daryn Miller, chief investment officer, in an email.
The target change is funded by a drop in the target to cash to -8% from -5%. The change includes further beta diversification for the capital efficiency program. Currently, beta is sourced solely from S&P 500 futures, and going forward, the program will add commodities futures and U.S. Treasury futures to lower beta volatility, according to a presentation from investment consultant Verus Advisory, which assisted in the recommendation.
"A more diversified beta portfolio would have less downside risk, thus requiring smaller reserves to provide the same level of safety, and leaving more capital available for allocation to the alpha pool," the presentation said.
Mr. Miller said the pension fund will look to add capital to existing managers and may expand the lineup. Specific details have yet to be determined.
As of Feb. 28, the actual allocation to the capital efficiency alpha pool asset class was 4.9% and consisted of five direct hedge fund investments.
