The Alaska Retirement Management Board (ARMB), which oversees the state’s retirement system and has $31.5 billion assets under management, is rebalancing its real assets portfolio target allocations to address the changing investment landscape in real estate and infrastructure. The new target allocations will go into effect on Oct. 1.
Core real estate and REIT holdings, which were targeted at 35 percent and 15 percent respectively, will decrease both target allocations by 5 percent. Meanwhile, ARMB is establishing goals of 5 percent each for non-core real estate and for real estate debt investments. In total, the target allocation for real estate (core + non-core + REITs + debt) will continue to be to make up 50 percent of AMRB’s real assets portfolio.
With present market conditions and the strong returns from AMRB’s infrastructure holdings, the board is increasing the real assets share of its infrastructure investments from 15 percent to 20 percent. In the fiscal year that ended on June 30, infrastructure returned a net 9.72 percent for AMRB. During the past three- and six-year periods, AMRB’s infrastructure investments posted annualized returns of 11.65 percent and of 11.28 percent, respectively.
Callan, which advises AMRB, have suggested that AMRB utilize the firm’s search process to fund two new real estate ODCE fund managers and one to two private debt-investment funds.
AMRB targets 14 percent of its portfolio to be allocated toward real assets. As of June 30 Gunther Deutsch, managing director and head of European real estate transactions at Barings , real assets made up 14.4 percent ($4.526 billion) of the fund’s portfolio. AMRB attributes its overweight stance in real assets to the outperformance of those investments relative to other asset classes in recent periods.