NEWS

Texas ERS Approves Revised Equity Target Allocations

By Mario Marroquin

The board of trustees of the $33 billion AUM Employees Retirement System of Texas (ERS) has adopted an asset allocation strategy that seeks to address higher liquidity needs than previously expected. Trustees voted unanimously, with one abstention, on the system’s 2022 Asset-Liability Study which concluded a “significant and rising liquidity demands to meet the near-term benefit obligations of the Trust.”

Changes to asset allocations are summarized below:

 

Actual

Current Target

Proposed Target

Public Equity

32.9%

37.0%

35.0%

Private Equity

19.7%

13.0%

16.0%

Private Infrastructure

5.2%

7.0%

5.0%

Global Credit (Public)

7.0%

10.0%

9.0%

Special Situations

1.1%

1.0%

0.0%

Hedge Funds

4.8%

5.0%

6.0%

Rates

11.1%

11.0%

12.0%

Cash

1.7%

1.0%

2.0%

 

The approved asset allocations called for an increase in the system’s risk-reducing assets to 20% from its current 17% target.

An analysis by NEPC, the retirement system’s general investment consultant, concluded the proposed targets would increase the expected return of the trust by 14 basis points over a 10-year and 30-year horizon.

A quarterly report from Chief Investment Officer David Veal said that as of June 30, the private equity allocation reached 19.7% due to a 28% year-over-year gain in the value of private equity investments and realized growth. The trust also sold more than $400 million in net asset value since 2019, according to meeting materials.