Florida benefits from equities overweights

The $110 billion Florida Retirement System Pension Plan (FRS PP) outperformed its policy benchmark by 10 basis points in the September quarter, thanks to overweight allocations to domestic and international equities.

For the June to September quarter, the fund increased its allocation to domestic equities by more than 2 per cent, moving from a market value of $35.144 billion to $40.810 billion, the result of slight reductions in high yield (0.5 per cent), real estate (1 per cent) and cash.

According to a memorandum from executive director and chief investment officer, Ash Williams, to the State Board of Administration of Florida (SBA), in the past 12 months the fund has taken 252 basis points in active risk, with market risk accounting for 2,019 basis points.

For the 12 months to September the fund had a total net return of -0.47 per cent, lagging its performance target by 55 basis points.

From June 2007 the fund has an absolute return target based on an actuarial assessment that FRS PP investments must on average appreciate by 5 per cent per year in excess of the rate of inflation to meet the SBA’s long-term investment objectives. This is up from 4 per cent from 2003 to 2007.

In the past quarter the fund, which has increased by $10.47 billion, only rebalanced portfolios once, with foreign equities transferring $713.5 million to fixed income ($693.3 million) and domestic equities ($20.2 million).

One of the more interesting activities for the fund during this year was the decision by the strategic investment staff to allocate capital to corporate activist hedge fund managers. The fund has an allocation of 3.5 per cent, or $3.8 billion, to strategic investments.