Arizona state pension system raises public equity and credit targets after asset-liability study

Arizona State Retirement System, Phoenix, raised its public equity and credit targets following an asset-liability study.

The board of the $48.6 billion pension fund approved the changes at its September 30 meeting, the minutes of the meeting recently released.

The pension fund has a policy of conducting such studies every three to five years with the assistance of NEPC, its general investment adviser.

The board approved increasing the public equity target to 44% from 40% and the credit target to 23% from 20%, while reducing the real estate targets to 17% from 20% and interest rate sensitive assets at 6% from 10% and maintaining the private equity target at 10%.

The minutes of the meeting did not provide further information on the reasons for the specific changes. The NEPC, in a presentation attached to the March 25 board meeting documents, had said that an “argument can be made that ASRS’ 12-year experience in implementing private credit has consistently provided higher returns and lower volatility than the benchmark, justifying the change in capital market assumptions for this asset class.”

As of June 30, the actual allocation was 23.5% credit, 21.4% domestic equity, 19.8% real estate, 14.5% international equity, 12.7% private equity and 6.9% interest rate sensitive fixed income securities and 1.2% cash.

Spokesman David Cannella could not immediately be reached for further information.