San Francisco City & County Employees' Retirement System is changing a $636 million passive domestic large-cap value equity portfolio managed by BlackRock to an active systematic equity strategy incorporating environmental, social and governance considerations run by the money manager.
The $36.1 billion pension fund's board approved the change in strategy at its meeting Wednesday, spokesman Stephen Worsfold said in an email.
The strategy is part of BlackRock's Systematic Active Equity offering and incorporates ESG considerations to outperform the Russell 1000 Value benchmark, with its expected annual tracking error increasing to 200 basis points from the 10 basis points of BlackRock's Russell 1000 Value index separate account in which SFERS is currently invested.
A news release from the pension fund Thursday said the active ESG-focused portfolio is expected to be at least 30% less carbon-intensive than the Russell 1000 Value benchmark and is aligned with the pension fund's goal to become net zero carbon by 2050.
A presentation included with Wednesday's board meeting materials said staff recommended the change to increase alpha as well as to incorporate more ESG considerations into its public equity portfolio.
The Systematic Active Equity strategy incorporates "ESG insights on topics such as carbon, water efficiency, carbon intensity, and human capital, and aligns with the goals of SFERS' ESG framework," the news release said.
As of Sept. 30, SFERS' actual allocation to public equities was 36.3%.
