FROM: Don Pierce, Chief Investment Officer
SUBJECT: Asset Allocation Review and Recommendations
RECOMMENDATION:
title
Review NEPC’s 2025 Asset Allocation Report and Recommendation.
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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 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.
NEPC’s 2025 Asset Allocation 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. While alternative mixes are offered for the Board’s consideration, NEPC recommends staying with the current strategic asset allocation mix.
NEPC and staff will discuss this report and the implications for SBCERA; however, forward return expectations remain elevated over previous years due to the relatively higher interest rate regime. The Investment Committee and the Board will review this material once more before a final asset allocation is considered for adoption in July 2025.
BUDGET IMPACT:
None.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Don Pierce
ATTACHMENTS:
Exhibit A: 2025 Asset Class Assumptions