Trustees of the $2.6 billion Chicago Policemen's Annuity & Benefit Fund approved a search for a custodian at a March 25 board meeting, confirmed Thomas Beyna, board president and chairman of the pension fund's investment committee, in an email.
The board directed NEPC, the pension fund's investment consultant, to provide a draft RFP for custodial services for trustees to review.
Northern Trust is the current custodian for the pension fund and can rebid for the contract, Mr. Beyna said.
The timing of the RFP has not been set.
Trustees also approved a new asset allocation for the pension fund at the same meeting.
Broadly, the new asset mix increases equity to 59% from 50%; decreases credit strategies to 26% from 30%; and reduces diversifying/multiasset strategies to 4% from 9%. The allocation to real assets is unchanged at 11%, a report from NEPC showed.
By asset class, in equities, the U.S. large-cap equity allocation increases to 23.5% from 13%; non-U.S. equity decreases to 12% from 15%; and emerging market equity rises to 7.5% from 6%. The allocations to the following equity subasset classes remain the same with private equity/microcap equity at 7%; U.S. smidcap equity, 6%; and long/short hedge funds, 3%.
In the credit strategies portfolio, the pension fund's new asset allocation decreases core/core-plus fixed income to 13% from 16%; adds a new 2% allocation to passively managed U.S. Treasury bonds; and eliminates a 3% allocation to global multisector fixed income. Weightings remain the same at 4% each for the opportunistic credit and private debt subasset classes and at 3% for emerging market debt.
Within the real assets portfolio, the allocations to both subasset classes remain the same with real estate at 7% and infrastructure, 4%.
The diversifying and multiasset strategies portfolio retains a 4% allocation to hedge funds and eliminates a 5% global asset allocation position.
In its report, NEPC said the new asset allocation is expected to produce an annualized 10-year return of 5.7% compared with 5.5% for the previous portfolio construction. Projected 20-year annualized returns are 6.7% from the new portfolio structure and 6.5% for the former asset allocation.
