San Diego City Employees' Retirement System's board Friday updated its investment policy statement, setting targets and benchmarks for the three components of its new broader return-seeking fixed-income allocation.
In May, the $10 billion pension plan board expanded its 5% emerging market debt allocation to a return-seeking fixed-income allocation. The amended investment policy statement expects to target 33.3% each of the newly expanded allocation to high yield, bank loans and emerging markets debt.
Aon, SDCERS' general investment consultant assisted.
Separately, the board approved its fiscal year 2022 real estate investment plan that includes committing $70 million to non-core real estate, split evenly between two investment strategies. SDCERS officials are to consider investing with existing managers or possible investing with new managers in niche areas such as cold storage, life sciences, data centers, single-family housing and non-U.S. industrial properties. The plan also calls for remaining in the redemption queues for its $40.8 million remaining investment in open-ended UBS Trumbull Property fund and its remaining $39.2 million investment in AEW Core Property Trust.
Townsend executives expect SDCERS' investment in the AEW fund to be repaid by mid-2022, but it could take three to four years before SDCERS receives its full redemption from the Trumbull fund, due to the size of its redemption queue, said Felix Fels, vice president of Townsend Group at SDCERS' investment committee meeting Thursday. In response to question from an investment committee member, Rob Kochis, a partner at Townsend explained that the UBS Trumbull fund had a big exposure to retail properties and "had been a challenged fund for a number of years now."
In other action, the board selected William Blair International Leaders Fund for an allocation of 13% allocation amounting to about $208 million of the $1.6 billion non-U.S. equity portfolio, following an invitation-only search.
The board added a new MSCI ACWI ex-U.S. mandate in May, following a non-U.S. equity portfolio structure review. The new international large-cap growth mandate was created to help alleviate the non-U.S. equity portfolio's large-cap equity underweight and value style bias, among other reasons.