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.
