FROM: Don Pierce, Chief Investment Officer
SUBJECT: Asset Allocation: 2024 Capital Markets Outlook
RECOMMENDATION:
title
Asset Allocation: NEPC’s 2024 Capital Markets Outlook.
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BACKGROUND:
Each year, NEPC updates their expected return estimates for various asset classes. We take the opportunity to review their findings with the SBCERA Investment Committee and Board. This preliminary report details the current SBCERA policy portfolio under the new asset class expectations and provides comparative portfolios for benchmarking purposes. While SBCERA reviews the asset allocation each year, the asset allocation does not necessarily change each year.
The 2024 preliminary NEPC report indicates the current asset allocation meets the Board approved 7.25% funding rate over the next 10-year period and the 30-year horizon. As a reminder, in 2022 the Board made changes to the Asset Allocation by shifting allocations from emerging market debt, and international equity to domestic equity.
NEPC and staff will discuss this preliminary report and the implications for SBCERA; however, forward return expectations remain elevated over previous years prior to the recent rate hikes. The Investment Committee and the Board will review this material once more before a final asset allocation is considered for adoption by July 2024.
BUDGET IMPACT:
None.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Don Pierce
ATTACHMENTS:
Exhibit A: 2024 Asset Class Assumptions