By David G. Barry
For the second time in the past
three years, the Iowa Public Employees’ Retirement System (IPERS) has
gotten the green light to increase its private equity allocation target.
The IPERS’ Investment Board voted to increase the segment’s target from 13% to
17%. In 2020, the board increased it from 11% to 13%. A key reason for making
the move is that the $40.1 billion system’s actual allocation to private equity
was 21% as of June 30.
Private equity also has been a significant performer for the system, returning
more than 68% for the 2020-2021 fiscal year and 23% for the 2021-2022 fiscal
year.
In a statement, IPERS CEO Greg Samorajski said
that “private equity’s historically strong performance means the current asset
allocation exceeds the current policy target. To avoid rebalancing illiquid
assets and potentially diminishing the portfolio’s value, and to ensure vintage
year diversification, the Investment Board responded with action that brings
the allocations more in line with IPERS’ actual targets.”
Wilshire Advisors, IPERS’ consultant, had recommended that the private equity
target be increased to 18%. Instead, the board voted to move it to 17% and
increase private real assets from 8.5% to 9.5%. IPERS’ actual allocation to
real assets was 9% as of June 30.
As a result, IPERS’ target allocation to private markets will increase from
29.5% to 34.5%. The third part of IPERS’ private markets portfolio – private
credit – will stay at its 8% target. It had a 4% actual allocation as of June
30.
To increase the private equity and private real assets sectors, IPERS decreased
U.S. equities from 22% to 21%, international equity from 17.5% to 16.5%, global
smart beta from 6% to 5%, fixed income from 20% to 19%, and public credit from
4% to 3%.
For the fiscal year ended June 30, IPERS had a return of negative 3.9%, beating
its policy benchmark by 0.15%. IPERS does not include the results of its
private investments in the calculation of its returns versus its policy
benchmark. The system has an approximate funded ratio of more than 85%.