Oregon eyes expansion in redefined alternatives asset class

The Oregon Investment Council is planning to hire three new managers in a newly-defined alternatives asset class, seeking to bolster its investment in areas like infrastructure and real assets.

The council, which oversees $95.5bn in assets and plans to nearly double its investment staff over the next two years, has separated private equity and real estate out of its alternatives portfolio. The fund wants to limit the asset class to investments that offer greater investment diversity and are less correlated with broader market.

The new alternatives class, which is underweight a 12.5% target allocation, includes investments like real assets, infrastructure, and timberland, according to spokesman James Sinks. Separating out real estate and private equity, whose valuations are more correlated to market swings, will allow the new alternatives class to provide a better hedge in the event of another downturn, Sinks said.

“This is one of the lessons learned from the global economic crisis in 2008 and 2009, when a lot of pension plans thought they were really well diversified,” Sinks said. “In that particular event, stocks, bonds, real estate and private equity all went down.”

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Published by Money Management Report/Pageant Media.

Public pension funds fret over high-flying U.S. equities

With U.S. stock prices regularly hitting new records in 2017, pension plans are enjoying high returns from their public equity investments. But many institutional investors are beginning to get nervous, wondering when the good times will inevitably come to an end.

A recent Northern Trust Asset Management survey found that 65% of investment managers believe U.S. equities are overvalued, compared to just 30% in the first quarter of 2016. Some pension funds are reacting with cuts to public equity allocations,
others are standing pat, and some are second-guessing their recent shifts to non-U.S. equities.

“There are fewer and fewer managers that think U.S. equities are fairly valued or undervalued,” said Mark Meisel, senior vice president at Northern Trust. “Some people are beginning to reallocate toward European equities and emerging markets. You are seeing some assets flowing that way.”

Despite growing nerves around valuations, institutional investors tend to have faith in the overall U.S economic outlook, benefiting from a longterm investment horizon as a shield from the pressure. Scott Evans, CIO for the $160bn New York City Retirement Systems, attributed recent positive returns to “ebullient” markets, calling the funds’ situation “dicey” and “fraught with risk” at a June 21 quarterly meeting.

“This is as good as it gets, so we should not be complacent,” Evans said.

Read the full story: Public pension funds fret over high-flying U.S. equities

Published by Money Management Report/Pageant Media.