FROM: Don Pierce, Chief Investment Officer
SUBJECT: Informational: 2020 Preliminary Asset Allocation Review
RECOMMENDATION:
title
2020 Preliminary Asset Allocation Review.
body
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 SBCERA 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 2020 preliminary NEPC report indicates the current asset allocation meets the Board approved 7.25% funding rate. As a result, the Staff does not currently anticipate requesting changes to the asset allocation for 2020.
The last change to the asset allocation occurred in 2018, which reduced the strategic allocation to Real Estate in favor of Emerging Market Debt (EMD). Another change, while not necessarily an asset allocation change, was eliminating the systematic call overwriting on the S&P 500 in 2019.
NEPC and staff will discuss this preliminary report and the initial proposed direction, and anticipates that the Investment Committee and the Board will be able to review this material at least once more before a final decision is needed for adoption of the July 2020 final allocation.
COMMITTEE REVIEW:
This item was reviewed by the Investment Committee at its May 19, 2020 meeting.
BUDGET IMPACT:
None.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Don Pierce
ATTACHMENTS:
Exhibit A: NEPC 2020 Preliminary Asset Allocation Review