NEWS

Returns of 9.9% driven by domestic equities for Arkansas Public Employees

By Muskan Arora

The $11.8bn Arkansas Public Employees’ Retirement System’s exposure to U.S equities has been a game changer, as it reported a return of 9.9% for the most recent calendar year.

The pension plan’s domestic equity bucket returned 18.6% for the calendar year and rose to approximately $5bn which is 42% of the system’s total portfolio.

Nonetheless, the Magnificent Seven, namely Amazon, Alphabet, Apple, Tesla, Meta, Nvidia, drove the S&P 500’s 25% increase for the year. The Mag 7 is responsible for the growth of the fund’s active equity managers.

While the Mag 7 have outperformed and given allocators great returns, almost 60% of the S&P 500’s returns were driven by these 7, which made it tougher for domestic equity managers.

While the pension plan is short of its benchmark at 10% in 2024, APERS outperformed its benchmark with a gain of 12.3% in 2023.

After five years, at its March meeting, the pension with consultant Callan has decided to review its international equity bucket which holds 22% of the total portfolio. Wary of uncertainty, the plan had previously lowered its target allocation to 17%.

There might be multiple factors that may affect the international portfolio, but the staff including Carlos Borromeo, deputy director of investments at the plan, considers divestment from China as a threat to the restructuring of the international equities sleeve.


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