Ohio Public Employees Retirement System, Columbus, plans to launch a $100 million internally managed risk-parity portfolio in March as part of its 2020 investment plan, spokesman Michael Pramik said in an email.
The $100.2 billion retirement system, which includes $87.8 billion in defined benefit plan assets, originally planned to launch an internal risk-parity portfolio in 2013, but it was put on hold due to the "complexities involving the futures and options agreements with broker-dealers and additional upgrades required for internal systems," according to a memo to the OPERS board from Paul Greff, chief investment officer, and John Blue, lead portfolio manager, external public markets, that was presented at the Wednesday board meeting.
The new internally managed portfolio will simplify the prior plan by using only exchange-traded fund futures contracts and a "modest amount of leverage," the memo said.
The retirement system began its risk-parity program in 2012 and currently has five external risk-parity managers. No changes to their existing portfolios are expected.
The new portfolio will target equal risk from commodities, equities and fixed income, and will target 8% of volatility compared with the 15% volatility of the external risk-parity managers.
The portfolio will initially be included in the retirement system's opportunistic asset class, which had an actual allocation of 0.1% in the DB plan as of Sept. 30.
The retirement system plans to transition the portfolio into its risk-parity asset class after eventual enhancements are implemented, with the goal of achieving returns that are competitive with the five external managers. The actual allocation to risk parity was 5.1% as of Sept. 30.