New Mexico PERA CIO explains market concerns, long-term strategy to participants

By Muskan Arora

Michael Shackelford, the chief investment
officer of the $17.9B New Mexico Public Employees Retirement Association
explained in a detailed letter about the pension plan’s long-term strategy amid
market turmoil.

In the current environment, the pension
plan has taken a strategic asset allocation approach where the staff is
allocating to various active and passive managers, as the long-term plan is
reviewed and altered every 3 to 4 years.

“The bottom line is that trying to predict
the market can be worse than designing a well-diversified portfolio and riding
through the volatility and downturn,” said the CIO, in the letter.

The pension plan has 33% of its current
portfolio in public stocks and about 14% in private equity, “which lags public
stocks pricing both up and down.”

The bond portfolio (both credit and
high-grade bonds) totals to 32% of its total portfolio and has supported the
plan through the volatile period.

While explaining about using a strategic
asset allocation, the CIO noted “timing the market is very difficult even for
the biggest, most equipped, and most informed investors.”

“Like most public pensions, PERA lacks the
systems, team size, and information advantage to time the market effectively.”

The pension plan reported a new return of
8.2%, as of December 31, with an assumed rate of return at 7.25%. 

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