Texas Teacher Retirement System, Austin, is launching a strategic asset allocation study.
The $181.7 billion pension fund will go through the asset allocation study process in 2024 due to its policy of conducting a study every five years, said spokesman Rob Maxwell.
TRS staff and investment consultant Aon are introducing the internal study process to board trustees at its Dec. 7 meeting, Maxwell said.
The board is expected to vote on recommendations from the study in September 2024, according to a timeline included with meeting materials. The materials do not say whether staff and Aon are looking into any specific recommendations.
The last time the pension fund completed an asset allocation study was September 2019. At the time, the pension fund increased its long-term targets to long U.S. Treasuries to 16% from 11%; real estate to 15% from 14%; private equity to 14% from 13%; risk parity to 8% from 5%; energy, natural resources and infrastructure to 6% from 5%; stable value hedge funds to 5% from 4%; and cash to 2% from 1%.
The pension fund in 2019 also eliminated its 4% target to directional hedge funds and moved those portfolios into other asset classes, and also eliminated its 3% target to U.S. Treasury inflation-protected securities. The 2019 target allocation added to 104% because TRS also added a new -6% target to asset allocation leverage, which with cash gave an overall net asset allocation leverage of -4%.
Targets that remained unchanged were 18% domestic equities, 13% international developed markets equities and 9% emerging markets equities.
In its Dec. 7 meeting presentation, Aon noted the significant events since the last asset allocation, including the freefall following the beginning of the COVID-19 pandemic, the subsequent easy money recovery and the Federal Reserve's interest rate hikes made to combat inflation.
As of Sept. 30, the actual allocation was 18% private equity, 16.5% real estate, 15.9% domestic equities, 12.8% government bonds, 11.6% international developed markets equities, 8.2% emerging markets equities, 7.1% ENRI, 6.8% risk parity, 5.4% stable value hedge funds, 3.2% absolute return, 2.5% cash, 0.4% commodities and -8.4% asset allocation leverage.