Tennessee plans asset allocation review

The Tennessee Consolidated Retirement System will conduct an asset allocation and portfolio implementation review, with an equities increase and reorganisation of the fixed income portfolio a likely outcome, as it investigates how to increase the returns of the fund at a strategic level.

The $29 billion fund is looking to increase its equity allocation as part of this review from 55 to 65 per cent of assets, up from its current position of around 50 per cent.

The fund is also looking at eliminating short-duration fixed income, adding non-investment grade fixed income and continuing to increase real estate.

The fund will also search for a general and private equity consultant.

TCRS returned 14.2 per cent for the year, which was an underperformance of 2.1 per cent against its allocation index.

Tactical asset allocation was the key drag and subtracted 4 per cent for 2009, with other negative contributing areas including domestic equities and international equities.

Domestic fixed income was the best performer for the fund, up 9 per cent for the year to the end of 2009.

At the March investment committee it was disclosed that the fund is looking to increase returns by a strategic increase of the equity mandate and modifying the domestic and international fixed income mandates.
Other plans include adding to private equity as an asset  class, by way of adding a distressed fund, a mezzanine fund, a small buyout fund, and another venture capital  fund.

The fund  also  has a goal  to  invest  up  to $1  billion  in  real estate over the next  five  years, and  is  also  exploring  the idea of launching a Canadian equity fund.

At the end of 2009 the fund had 2.7 per cent in short-term, 3.3 per cent in real estate, 7.9 per cent in inflation-hedged bonds,3.6 per cent in international fixed income, 33.4 per cent in US fixed income, 14.5 per cent in international equity, and 34.6 per cent in US equity.