The Pension Boards has made a revision to the asset allocation of the Participating Annuity. The prior stated asset allocation was 60% to equities and 40% to fixed income. The asset allocation targets now incorporate the inclusion of a 10% target allocation for real assets.
The asset allocation to equities will now be 55% to 60% and the allocation to fixed income will now be 30% to 35%.
Real assets are physical or tangible assets that have value, and provide essential services to the global economy. They are very often productive for long periods of time, and generally do not depreciate over time. Typically, real assets exclude commodities and financial assets that experience greater volatility.
Real assets currently approved by the Investment Committee of the Board of Trustees are real estate equity and debt, and infrastructure investments in both public and private markets. In a professionally-managed portfolio, infrastructure investments might include toll roads, ports or rails.
Our long-term assumptions for capital markets returns for all assets are always being evaluated as part of a continual process of improving the return and risk characteristics of all Pension Boards Funds and annuities.
The real asset and infrastructure allocation is designed to increase expected return, improve diversification and lower volatility, provide income, and provide long-term inflation protection. Fixed-income investments, in particular, cannot typically provide inflation protection, or the opportunity to increase returns with rising prices, should that occur in the future.
The change will be phased in and implemented over the next twelve months. Some of the investments can be made immediately.
The Basic Annuity will not be affected at this time, primarily because the investments supporting this Annuity are different and also because the Basic Annuity has somewhat more conservative return and risk objectives. However, it is possible that some income-oriented real assets may be considered for inclusion in the Basic Annuity by the Investment Committee in the future.
The Pension Boards will continue to monitor the investment funds and allocation of all active and annuity funds and will keep you apprised through direct communications and the Pension Boards' website.
Please note that the asset allocation of the Participating Annuity and all other Pension Boards' Funds and annuities are subject to change at any time based on the recommendation and approval of the Investment Committee of the Board of Trustees.
If you have any further questions, please contact a Pension Boards Member Services representative toll-free at 1.800.642.6543.