There's very little that's simple about running a $35.6 billion investment portfolio.
Take it from Michael Hitchcock, chief executive officer, and Geoffrey Berg, chief investment officer, of the South Carolina Retirement System Investment Commission, Columbia, which manages the assets of South Carolina state pension funds on behalf of the South Carolina Public Employee Benefit Authority.
The stakes are high for Messrs. Hitchcock, Berg and the other 40 full-time RSIC employees, as both large and small decisions can lead to unforeseen benefits or consequences for the South Carolina Retirement Systems' 600,000-plus members.
When Mr. Hitchcock looked at the RSIC portfolio in late 2018 as part of a regular review, he didn't see much simplicity. What he saw was a portfolio with 18 asset classes and 21 benchmarks. "It was a portfolio that we arrived at with the best of intentions but we're trying to put together something that we feel can give us a good probability of exceeding our annual rate of return," Mr. Hitchcock said. "But when we took stock, we felt that there was this unnecessary complexity and unnecessary required complexity."
The portfolio included five asset classes — like mixed credit and public and private infrastructure — with target weights of 3% or less. "Not that some of those options weren't bad to have in the portfolio but requiring (the RSIC) to always have those in the portfolio was probably not necessarily the best course of action for us," he added.
The portfolio was set up so that "complexity was the default," Mr. Hitchcock said, so he and his team went to work on simplifying it.