Vermont Pension Investment Committee, Montpelier, is conducting an asset allocation study for the $4.5 billion Vermont State Retirement Systems.
The study will be conducted by the staff and new investment consultant RVK, and it is tentatively scheduled to be completed in the spring of 2021, said Eric Henry, chief investment officer.
The study will focus on the three thematic portfolios in the asset allocation of the retirement systems — growth, inflation hedging and downturn hedging — with a particular emphasis on downturn hedging.
The downturn hedging portfolio can include core fixed income, short-term quality credit and U.S. long Treasuries. According to Nov. 10 committee meeting minutes, the study "will analyze the sizing of the downturn hedging assets, the composition of those downturn hedging assets, and finally the treatment of uncalled capital."
The growth portfolio includes public markets, private markets and risk-seeking fixed income such as emerging markets debt and high yield. The inflation hedging portfolio includes Treasury inflation-protected securities, infrastructure, core real estate and farmland.
The current targets for the three portfolios are 70% growth, 20% downturn hedging and 10% inflation hedging.
Within growth, the targets (percentages of the total assets) are 24% passive global equities; 10% each private credit and private equity; 5% each active global equities and international developed markets equities; 4% each emerging markets debt and domestic large-cap equities; 3% each domestic small/midcap equities and non-core real estate; and 2% international small-cap equities.
Within downturn hedging, the target is 20% core fixed income, and within inflation-hedging, the targets are 5% core real estate, 3% U.S. TIPS and 2% infrastructure/farmland
The three retirement systems — the Vermont State Teachers' Retirement System, the Vermont State Employees' Retirement System and Vermont Municipal Employees' Retirement System — share identical target allocations but have slightly different actual allocations.