By Muskan Arora
The $11.8bn Arkansas Public Employees’
Retirement System’s exposure to U.S equities has been a game changer, as it reported
a return of 9.9% for the most recent calendar year.
The pension plan’s domestic equity bucket
returned 18.6% for the calendar year and rose to approximately $5bn which is 42%
of the system’s total portfolio.
Nonetheless, the Magnificent Seven, namely
Amazon, Alphabet, Apple, Tesla, Meta, Nvidia, drove the S&P 500’s 25% increase
for the year. The Mag 7 is responsible for the growth of the fund’s active
equity managers.
While the Mag 7 have
outperformed and given allocators great returns, almost 60% of the S&P 500’s
returns were driven by these 7, which made it tougher for domestic equity
managers.
While the pension plan is short of its
benchmark at 10% in 2024, APERS outperformed its benchmark with a gain of 12.3%
in 2023.
After five years, at its March meeting, the
pension with consultant Callan has decided to review its international equity
bucket which holds 22% of the total portfolio. Wary of uncertainty, the plan
had previously lowered its target allocation to 17%.
There might be multiple factors that may
affect the international portfolio, but the staff including Carlos Borromeo,
deputy director of investments at the plan, considers divestment from China as a threat to the restructuring of the international equities sleeve.
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