COAERS' investment beliefs are foundational to its long-term management of the Fund. They are the guiding principles by which the COAERS Board, the Staff and the investment consultant serve the long-term interests of the members, and consistantly and sustainably achieve best-in-class results.
- The Fund is a permanent entity with long-lived liabilities and, as such, it should strive to be a thoughtful, analytical, and patient investor that is focused on achieving successful outcomes.
- Clear governance and decision-making structures that promote decisiveness, simplicity, efficiency, and accountability are effective and add value to the Fund.
- To the extent possible, investment decision-making should be driven by data and analysis, including the findings of relevant research on financial markets and investment management.
- Strategic asset allocation is the most critical aspect of the investment process, with the level of risk assumed by the Fund driven primarily by its allocation to equity investments.
- The Fund should seek to be well compensated for the investment risks it chooses to bear, risks that should be articulated at the time of investment and revisited regularly.
- Diversification across asset classes and risk factors is central to the System’s investment strategy, and investments that may improve the Fund’s risk/return profile will be considered.
- Equities are the most prudent investment vehicle for long-term growth of real values, and the associated drawdown risk should be carefully managed in light of the Fund’s liabilities.
- Costs can significantly reduce net returns and therefore must be carefully measured and managed when making decisions regarding investment strategy and implementation.
- Implementation should occur passively and in public markets unless a high likelihood of success on a risk-adjusted, net-of-fees basis can be expected from other approaches.
Derived from its investment beliefs, COAERS has set forth a set of investment goal to fulfill our purpose of accumulating the financial reserves necessary to provide promised benefits to our members. The Fund will be structured and managed to achieve the following goals:
1. Achieving a long-term, annualized absolute rate of return that:
- Meets or exceeds the assumed actuarial rate of return for the System;
- Meets or exceeds the actuarially assumed rate of inflation by 4.75%.
2. Achieving a long-term, risk-adjusted relative rate of return that:
- Ranks in the top quartile of peer comparisons consistently;
- Meets or exceeds the Passive Index (i.e. the Reference Portfolio); andMeets or exceeds the Policy Index (i.e. the Strategic Benchmark).
3. Achieving these strategic objectives via fiduciary best practices that:
- Ensure proper diversification of asset classes and factor exposures;
- Maintain appropriate long-term risk and return expectations; and
- Adapt the asset allocation to changing market conditions.
The Board, with consultation, advice and assistance from the System’s Staff and Investment Consultant, will use the Fund’s strategic asset allocation and its effective implementation as the primary tools to achieve these goals.