Indiana provides derivatives, will increase danger parity allocation

Retirement System’s board of directors approved a new asset allocation for its $ 34.8 billion defined benefit plan, which includes a new portfolio of derivatives and a significant increase in the target allocation to risk parity.

The board of directors of the -based pension scheme approved the changes recommended by investment advisor Verus Advisory following an asset-liability study at its May 7th meeting, spokesman Dimitri P. Kyser said in an email. The board hired Parametric Portfolio Associates to manage the new derivatives portfolio.

Asset class targets are 115% with the introduction of the new derivatives portfolio to complement the current cash overlay portfolio to increase economic exposure to US long-only government bonds and domestic large-cap stocks, according to a presentation in the US Meeting documents showed.

The board of directors agreed to suspend Parametric when Verus Advisory recommended the company’s choice as the manager is already overseeing the cash overlay program. Parametric uses futures contracts to get market exposures with the system’s friction money. With the cash overlay program, the asset class targets were previously 109.1%.

Increased goals are the risk parity from 12% to 20%; private markets from 14% to 15%; fixed income securities (subject to inflation) from 13% to 15%; Raw materials to 10% from 8%; and real assets from 7% to 10%.

The reduction targets approved by the Board of Management were the absolute return from 10.6% to 5%; fixed-income securities (ex-inflation dependent) from 22.5% to 20%; and public stocks from 22% to 20%.

As a result of the asset-liability study, the management board also agreed to reduce the assumed return from 6.75% to 6.25%.

As of January 31, the actual allocation of the DB plan was 22.5% public shares; 20.1% fixed income securities (ex-inflation linked); 13.7% risk parity; 12.3% private markets; 9.9% absolute return; 7.9% raw materials; 6.9% fixed income securities; 6.3% real estate; and the rest in cash.

Comments are closed.