The $4.8B Santa Barbara County Employees’ Retirement System hiked its core fixed income target while lowering its domestic equities and emerging markets equities target.
Following an asset allocation study, the board approved increasing the target allocation to core fixed income to 20% from 17% and decreasing targets to domestic equities to 17% from 19% and emerging markets equities to 6% from 7%, according to the recent meeting materials.
RVK, the pension’s investment consultant, noted that the changes were made due to the current capital market expectations, namely diminishing expected equity risk premium and elevated public equity valuations. This has “increased the relative attractiveness of fixed income and presents an opportunity to take risk off the table without significantly impacting long-term returns,” noted the consultant.
RVK also noted that the change has resulted in the rebalancing of $50M each from domestic and emerging markets equity managers to fixed-income managers. Targets for real return (15%), international developed markets equities (11%), non-core fixed income (11%), private equity (10%), and real estate (10%) remained unchanged.
