Oregon Investment Council, Tigard, on Wednesday, adopted a new asset allocation for the $91 billion Oregon Public Employees Retirement System that increased fixed income to 25% from 20%, and eliminated its risk parity portfolio, adding its 2.5% allocation to public equity.
Among the reasons the council removed its risk parity portfolio were that the allocation was too small to materially impact the entire portfolio, higher interest rates would hurt risk parity due to its use of leverage and the portfolio's relatively poor performance in 2022, council meeting materials show.
At the prior, Nov. 2 council meeting, staff and general investment consultants, Meketa Investment Group and Aon Investments, had recommended that the risk parity allocation be used to increase the pension fund's private equity allocation to 2.5%. However, board Chairwoman Cara Samples asked for additional options that added the 2.5% to either public equity or fixed income.
Those options showed the asset allocation that boosted public equity to 27.5% rather than private equity, resulted in the same expected return of 7.6%, a slight reduction in expected volatility of 11.4% vs. 11.6% and an expected maximum drawdown of 39.4% vs. 40%.
Allocations to the remaining asset classes stayed the same at 20% private equity, 12.5% real estate, 7.5% real assets and 7.5% diversifying strategies.
Separately, the council hired Aksia as its new opportunity portfolio consultant, after a search over the summer. The opportunity portfolio invests in strategies that fall outside its strategic asset allocation and includes new or innovative strategies, Mike Mueller, investment officer for alternatives told the council on Wednesday. The pension plan had $2.4 billion in its opportunity portfolio as of Sept. 30.