NEWS

Colorado PERA finds opps in RE, PE and PC, amid a new strategic study

By Muskan Arora

The $61bn Public Employees’ Retirement Association of Colorado (PERA) increased its allocation to private equity and real estate with a decrease in global equity, with a hope to reach 100% funded status.

The current target for both real estate and private equity is 8.5% which has now moved up to 10%. Global equity’s current target at 54% is now reduced to 51%.

As the portfolio transitions, uninvested private equity and real estate allocations will be invested in Global Equity, as per the meeting documents.

Further within the alternative asset class, the new strategic asset allocation hiked allocation to real assets and private credit whilst reducing allocating to hedge funds and opportunistic investments.

“Restructures alternatives to provide larger and strategic allocations to private debt and real assets,” as stated in the recent meeting material.

For the real assets sleeve, the system has adopted an increase to 3% from 1.65% and 3% from 0% for its private credit sleeve.

While the private credit sleeve may lean more towards opportunistic in the early years, the system anticipates 2-3 years to build the PC allocation with a focus on direct lending.

As soft targets for its private credit strategy, the system is focused more on core, especially direct lending including sponsor and non-sponsor senior corporate loans and corporate loans.

For its non-core side, the system is focused on diversifying/ return enhancing strategies including special situations, opportunistic credit, speciality finance, secondaries/co-investments and asset-based lending.

PERA expects to reach its new long-term targets within two to three years.

The system usually conducts an asset/liability study every four to five years to scrutinize the system’s DB portfolio to ensure the mix of stocks, bonds and other variables align with the funding goals.


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Portfolio returns

The real estate portfolio returned -8.9%, 7.9% and 7.6% respectively for its 1-, 3-, and 5-year return, as of March 31.

The private equity portfolio returned 5.8%, 8% and 12.9% respectively for its 1-, 3-, and 5-year return, as of March 31.

The alternatives portfolio returned 7.5%, 7.2% and 7.6% for its 1-, 3-, and 5-year return, as of March 31. 

The funded ratio of the system is 69.6%