By David G. Barry
The Pennsylvania
State Employees’ Retirement System (SERS) has restructured its $7.7 billion
fixed income portfolio, a move that allows it to be essentially at its newly
approved asset allocation policy and leaves it – at least for now – with extra
cash.
Through transactions totaling $4.6 billion, SERS moved completely out of Old
Fixed Income – which had accounted for 12.2% of its portfolio – and beefed-up its
Core Fixed Income and Nominal U.S. Treasuries segments. The system previously
only had $2.1 billion, or 5.9% of its portfolio, in Core, a segment which had a
15% target. It now has $5.2 billion, or 14.4%. Treasuries, meanwhile, have gone
from 0.3% to 2.5% with a transfer of $835 million. This, in turn, puts it
closer to its 5% target for the sector.
These moves also resulted in SERS receiving $676 million in cash. This means
that SERS’ total cash is now $1.39 billion, putting it at 3.8% of the portfolio.
The plan’s target is 2%.
In remarks to the investment committee, SERS CIO Jim Nolan said the cash
will be available for “future rebalancing.”
In May, SERS’ board adopted its Enhanced Asset Allocation Policy, which
combined the plan’s existing 4% private credit and 12% private equity
allocation into a single 16% private equity allocation. The board also gave the
CIO authority to align the fixed income portfolios with the enhanced policy.
After the moves, the only segment in which SERS is outside its stated
allocation goal is private equity. As of May 27, it was at 19.7%, nearly 4%
above its target.
As of May 27, SERS had total assets of $36.6 billion. It ended 2021 with $40.2
billion.