City of Fresno Retirement Systems to build PE portfolio

CFRS will begin this year to develop a portfolio of private equity investments, increasing the fund's exposure to illiquid assets in an effort to bolster expected returns. The pension fund currently does not invest in the asset class.

Robert Theller, retirement administrator for the fund, said in an emailed statement that the new allocation, which also includes infrastructure investments, was adopted to create more return drivers for the retirement plans, and to decrease the plan's overall risk and volatility. Currently the pension fund has no preference for specific fund types, and will consider funds investing across the globe.

Invitation-only searches for new managers will be conducted through the retirement board's investment consultant, NEPC, although a timetable for these searches has not yet been established.

Initial target allocations to private equity over the proposed four-year plan are 1% in 2017, 3% in 2018, 4% in 2019 and 5% by 2020. Beyond this, the LP will conduct an asset allocation study to determine if a 5% target remains appropriate.

The pension fund is also gradually allocating capital to infrastructure investments and master limited partnerships, targeting 4% and 5% exposure respectively by 2020. These increases come at the expense of the fund's public equities allocation, which will reduce from 60% currently to 48% in 2020. As the two funds are fully funded, the reduction of public equity exposure is designed to protect the funds from equity drawdowns.

 

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