Ohio School Employees Retirement System, Columbus, is adding a new target allocation to private credit and eliminating its target to multiasset strategies, which includes hedge funds.
The $15.2 billion pension fund's board approved the changes at its Feb. 20 meeting following an asset-liability study conducted by general investment consultant Wilshire Associates, spokesman Tim Barbour confirmed.
The pension fund's board approved the creation of a new 5% target allocation to private credit, and increasing the targets to global real assets to 17% from 15%, global private equity to 12% from 10% and cash to 2% from 1%. Funding comes from the elimination of the 10% target to multiasset strategies.
According to the meeting highlights, although multiasset strategies played a role in diversifying risk in the pension fund's overall portfolio, the recent customization of the fixed-income portfolio will perform similar risk diversification with "expected higher returns."
The creation of the private credit portfolio comes following the gaining of staff experience in recent commitments to 12 direct lending and structured/distressed credit funds with six managers. Those commitments have been allocated to the opportunistic and tactical asset class, which does not have a dedicated target but had an actual allocation of 2.3% as of Dec. 31.
On July 1, the beginning of the pension fund's new fiscal year, the private credit strategies will be moved to the new asset class.
Mr. Barbour said in an email that it is possible some existing hedge fund strategies will be moved to other asset classes, although which portfolios have yet to be determined. SERS' transition to the new asset allocation is expected to take two years. He added the pension fund has no immediate plans to terminate hedge fund consultant Aksia, which is under contract through 2022.
Targets that will remain unchanged are 22.5% each domestic equities and international equities, and 19% global fixed income.
As of Dec. 31, SERS' actual allocation was 24.5% domestic equities, 23.2% international equities, 15.7% global fixed income, 14.6% global real assets, 9.5% global private equity, 7.1% multiasset strategies, 3.1% cash equivalents, and 2.3% opportunistic and tactical strategies.
