Asset allocation means investing funds across different markets or asset classes in an attempt to dampen the overall volatility of IPERS' investment returns. This decision of how to diversify the portfolio has a great influence on investment returns. The Investment Board decides what risks are prudent to take and makes its asset allocation decision by adopting a policy benchmark that identifies the portion of the Trust Fund to invest in each asset class. IPERS’ investment staff periodically rebalance the Fund’s investments to keep the portfolio in line with the policy benchmark, but variances may occur from time to time because of market conditions.
Below are the asset allocation targets established by the Board at its September 2012 Board meeting. Note that the Investment Policy recognizes that it may take many months to fully implement some of the changes (especially allocations to other real assets), and that the policy benchmark will change as those asset classes are implemented.
IPERS Asset Allocation Targets
Target Allocations as a Percentage of Total Fund
Domestic Equity: Investment in the stocks of companies that are based in the United States.*
International Equity: Investment in the stocks of companies that are based outside the United States.
Private Equity/Debt: Investment in the stock and debt of privately held companies. These investments are held in limited partnerships designed to limit IPERS’ potential losses.
Core Plus Fixed Income: Investment in bonds issued by governments and companies throughout the world.
Credit Opportunities: Investment in high-yield corporate bonds and emerging markets corporate and sovereign debt.
U.S. TIPS: Investment in United States Treasury Inflation-Protected Securities and global inflation-linked bonds.
Equity Real Estate: Investment in properties, and in the stocks of companies that manage properties, in the four major commercial real estate sectors (office, industrial, retail, and apartments).
Other Real Assets: Investment in inflation-sensitive assets, which may include commodities, farmland, timber, private energy partnerships, MLPs, or infrastructure. (This allocation does not become part of the policy benchmark until funding occurs.)
Cash: Investment in highly liquid, short-term money market instruments.
*IPERS uses “portable alpha” strategies in its domestic equity portfolio. These strategies obtain the desired market exposure to the U.S. stock market through S&P 500 stock index futures. However, the source of any excess returns versus the market (known as “alpha”) will come from various active investment strategies that may invest in securities from several different asset classes.
To learn more about IPERS’ portfolio, view the Comprehensive Annual Financial Report.