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 Staff and the Investment Consultant, is responsible for setting the Strategic Asset Allocation (SAA) for the Fund and reviewing it periodically.
Asset/Liability studies are conducted at least every five years and provide the primary basis for changes to the SAA. Relevant policies are amended when a proposed investment strategy is adopted, and during times of phased transition to a new allocation, current values may deviate from the target SAA. 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 may cause the Fund’s actual allocation to differ from its strategic targets. As such, a range has been set for the actual asset allocation of the System’s assets to allow for fluctuations that are inherent in marketable securities. Rebalancing will take place when allocation amounts move beyond the rebalancing ranges set forth in policy.
Based on its determination of the risk tolerance 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.