The $15.65 billion Ohio Police & Fire Pension Fund’s investment committee has approved a 5% allocation to gold to help give the portfolio a strong diversifier to its growth investments, while also providing a hedge against inflation.
The move comes as gold has reached an all-time high this year and as it is up more than 20% year to date. Even Warren Buffett, known to disdain the idea of investing in the precious metal, has joined the 2020 gold rush.
The Ohio fund’s investment committee reported that Wilshire Associates, its general investment consultant, began an asset allocation review and presentation last week. And although the comprehensive review is still ongoing, the fund’s board approved one change to the portfolio so far, which was the addition of the 5% allocation to gold.
The fund’s investment staff and Wilshire are now exploring how to best implement the strategy. The fund said it won’t hire a new manager, and there is so far no timeline for implementation. To allow for the additional 5% allocation, the pension’s board also approved raising the current leverage amount on the total portfolio to 25% from 20%.
The fund also reported a strong rebound for its investments in the second quarter, as its portfolio earned 9.21% during the period, and the asset value of the pension has risen by $750 million since May. However, due to the rough first quarter, the fund’s investments are still down 5.5% for the year so far.
The board also approved the rebalancing of its open-end real estate portfolio, specifically open-end funds, as pitched by its real estate investment consultant The Townsend Group. As part of the rebalancing process, the board approved a full redemption request from Jamestown Premier Property Fund (the pension’s current investment is valued at approximately $86.4 million), a partial redemption request of $50 million from Heitman Core Property Fund, and a partial redemption request of $50 million from JP Morgan Strategic Property Fund.
The pension fund’s asset allocation as of the end of July was 18.7% in US equity, 17.6% in non-US equity, 12.9% in fixed income, 10.6% in real estate, 9.4% in high-yield bonds, 9.3% in US inflation-protected securities, 8.6% in private markets, 5.4% in master limited partnerships, 3.5% in real assets, 2.8% in private credit, and 1.3% in cash.
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Tags: gold, Inflation, Ohio Police & Fire Pension Fund, Townsend Group, Wilshire Associates