Asset allocation refers to the percentage distribution of investments grouped by asset class. An asset class consists of investments having in common certain fundamental and risk-based characteristics. The Board, in conjunction with advice from the Investment Consultant, and Professional Staff is responsible for strategic asset allocation decisions.
Periodic asset/liability studies provide the basis for changes to the portfolio allocation policy. Guidelines will be amended when a proposed investment strategy is adopted. During times of phased transition to a new allocation, current values may deviate from the established strategic mix. The Board will review its asset allocations periodically, or sooner, if a material event in either the liability structure of the plan or the capital markets warrants a sooner look.
Market movements also may cause a portfolio to differ from its strategic mix. Therefore, a range has been set for the actual asset allocation of the System’s assets to allow for the fluctuations that are inherent in marketable securities. Rebalancing will take place when such triggering event effects variances beyond their recommended range.
Based on its determination of the appropriate risk posture for the Fund and its long term return expectations, the Board in consultation with Staff and the Investment Consultant has established the strategic asset allocation for the Fund as shown in the table below.