By Muskan Arora
The $61bn Public Employees’ Retirement Association of
Colorado (PERA) increased its allocation to private equity and real estate with
a decrease in global equity, with a hope to reach 100% funded status.
The current target for both real estate and private equity
is 8.5% which has now moved up to 10%. Global equity’s current target at 54% is
now reduced to 51%.
As the portfolio transitions, uninvested private equity and real
estate allocations will be invested in Global Equity, as per the meeting
documents.
Further within the alternative asset class, the new strategic
asset allocation hiked allocation to real assets and private credit whilst
reducing allocating to hedge funds and opportunistic investments.
“Restructures alternatives to provide larger and strategic
allocations to private debt and real assets,” as stated in the recent meeting
material.
For the real assets sleeve, the system has adopted an
increase to 3% from 1.65% and 3% from 0% for its private credit sleeve.
While the private credit sleeve may lean more towards
opportunistic in the early years, the system anticipates 2-3 years to build the
PC allocation with a focus on direct lending.
As soft targets for its private credit strategy, the system
is focused more on core, especially direct lending including sponsor and
non-sponsor senior corporate loans and corporate loans.
For its non-core side, the system is focused on
diversifying/ return enhancing strategies including special situations,
opportunistic credit, speciality finance, secondaries/co-investments and
asset-based lending.
PERA expects to reach its new long-term targets within two
to three years.
The system usually conducts an asset/liability study every
four to five years to scrutinize the system’s DB portfolio to ensure the mix of
stocks, bonds and other variables align with the funding goals.
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Portfolio returns
The real estate portfolio returned -8.9%, 7.9% and 7.6%
respectively for its 1-, 3-, and 5-year return, as of March 31.
The private equity portfolio returned 5.8%, 8% and 12.9%
respectively for its 1-, 3-, and 5-year return, as of March 31.
The alternatives portfolio returned 7.5%, 7.2% and 7.6% for
its 1-, 3-, and 5-year return, as of March 31.
The funded ratio of the system is 69.6%
