Arizona expands allocation ranges, freezes private investments

The $27 billion Arizona State Retirement System has extended its asset allocation ranges and postponed the approval of new commitments to private market investments until the end of June, unless an overriding investment opportunity exception exists.

The delay on new private market allocations is an extension of the fund’s decision in January to postpone until March allocations to investments with locked-up capital in private equity, private real estate, opportunistic investment. The fund has a target allocation of 6 per cent to real estate, and 5 per cent to private equity, with a zero allocation to opportunistic, but a range of up to 5 per cent.

At the fund’s investment meeting last week the committee decided to extend its asset allocation ranges on equities and fixed income from plus or minus 5 per cent, to 10 per cent, in the hope an extended range may reduce the need for rebalancing that is inconsistent with the ASRS relative value perspective.

The proposed new ranges are 35 to 55 per cent for US equity, 8 to 28 per cent for international equity, and 16-26 per cent for US fixed income. Prior to this approval the ranges were 26 to 36 per cent for US large cap equities, 5 to 9 per cent for US mid cap equities, and 5 to 9 per cent for US small cap equities. At the moment there is an 18 per cent allocation to international equities, and a 26 per cent allocation to US fixed income.

The fund’s investment management division, along with consultants New England Pension Consultants (NEPC) and Mercer, also recommended the opportunistic investment committee consider rescinding the approval of global tactical asset allocation mandates and reclassify the funds allocated to US equity, and non-US equity and fixed income.