IPERS Reallocates Portfolio and Portfolio Agenda

The reallocation sees the fund increasing its overall investment in private equity by 400 basis points.

The Investment Board of the Iowa Public Employees’ Retirement System voted to amend and update the system’s overall asset allocation plan. The reallocation increases the fund’s overall investment in private equity by 400 basis points. Private equity will now represent 17.0% of the portfolio’s assets.

The IPERS Investment Board had previously voted to increase private equity allocation to 13% from 11% of the fund’s portfolio in 2020.

The reallocation is not a move to allocate more fresh powder into the asset class, but rather allows the portfolio to not be a victim of its own success. The gains in the asset class have been so strong and consistent that the private equity portfolio was larger than allowed by the fund’s asset allocation. The issue arose as PE rose and other asset classes slumped in recent months.

“Private equity returned more than 68.0% and 23.0% in FY2021 and FY2022. Private equity’s historically strong performance means the current asset allocation exceeds the current policy target,” IPERS CEO Greg Samorajski said in a statement.

“To avoid rebalancing illiquid assets and potentially diminishing the portfolio’s value, and to ensure vintage year diversification, the Investment Board responded with action that brings the allocations more in line with IPERS’ actual targets,” he continued.

The IPERS Investment Board annually reviews its asset allocation plan. This year, the board also raised its allocation in private real assets to 9.5%, a 100-basis point increase over its previous allocation.

These changes to the portfolio’s structure come after private equity outperformed public equity returns in allocations by state pension funds by an annualized 4.1% over the last 21-year period, according to a report put out by the Chartered Alternative Investment Analyst Association.

For the fiscal year ending June 30, the asset value of the Iowa PERS trust fund was $40.13 billion.

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