The $56 billion Pennsylvania Public School Employees’ Retirement System (PSERS) has made a few adjustments to its current asset allocation that slightly increased the allocation to fixed income and cash by slightly decreasing allocations to public equities, leverage, risk parity, and real estate to reduce the fund’s risk profile and better protect the fund’s assets in the event of a market correction. The adjustments provide the fund additional financial flexibility through increased liquidity.
The exact allocations were not provided by the pension fund; however, PSERS previously had a target allocation to real estate of 12 percent.
PSERS executive director Glen Grell commented, “The actions the board took today are minor adjustments focused on risk reduction, to better protect our members’ assets should the markets correct from the recent highs. If the market correction occurs, we will be better prepared and these minor changes to the asset allocation will help to limit the negative impact to the fund.”
In addition, the board announced that AON Hewitt Investment Consulting (AHIC) was awarded a five-year contract to provide investment consulting services for PSERS defined benefit and defined contribution plans pending successful contract negotiations. AHIC is PSERS current general investment consultant.
The board also re-elected Susan Lemmo and Deborah Beck to their board seats as no other candidates were nominated by the membership. Lemmo and Beck, therefore, were elected by acclamation.
In other business, PSERS CIO James Grossman Jr. presented an internal report prepared in response to PSERS Board Resolution 2017-41, which was advanced by Treasurer Joseph Torsella last year. This resolution tasked PSERS Investment professionals and investment consultants to develop a long-term plan to reduce investment management fees over a three-year period and address the wide disparity in fee reporting among public pension plans.
PSERS investment professionals and consultants worked over the past eight months in response to the resolution to develop the long-term plan, which focuses on renegotiating management fee arrangements to create a better alignment of interest between PSERS and each investment manager and expanding PSERS internal management. The projected compounded savings of the plan are $2.49 billion over the next 30 years and build upon PSERS ongoing efforts to reduce base management fees and improve efficiencies.
Grossman commented, “PSERS worked diligently over the past few years to increase efficiencies and lower base management fees while carefully managing any change in investment risk that resulted. We have a fiduciary duty to our members to operate the system in their best interests and we take this duty very seriously. This plan builds upon PSERS’ hard work to reduce base fees and manage risk.”
