Ohio Police & Fire Pension Cuts Assumed Rate of Return to 8%

Fund also terminates $259 million non-US equity mandate, opens manager search.

The $15.34 billion Ohio Police & Fire Pension Fund’s (OP&F) board of trustees has lowered the assumed rate of return on its investments to 8% from 8.25%.

 The board also approved a recommendation by Wilshire Associates, the fund’s general investment consultant, to restructure the portfolio’s non-US equity asset class. Based on Wilshire’s structure analysis, the fund said Fidelity Asset Management’s $259 million non-US equity small-cap mandate will be terminated.

 “The previous non-US equity structure has been in place since 2011, and the entire asset class was reviewed for efficiencies regarding active risk and return objectives,” David Graham, communications manager for OP&F, told CIO. “The new structure boosts expected return and reduces expected risk, while allowing OP&F to reduce its overweight to international small-caps, and move closer to its overall target for the asset class.”

 OP&F said it will work with Wilshire Associates to conduct a closed search for an active ACWI ex-US manager to take over a portfolio currently run by Russell as an interim transition assignment. Non-US equity is currently 21.2% of the total portfolio; however, this is well above the fund’s long-term target allocation for non-US equity of 16%.

In its investment note for October, OP&F said its real estate consultant, Townsend Group, reviewed performance for periods ended June 30, and reported a 2.1% net return for the quarter, and a 12-month net return of 8.1%.

The OP&F board also approved a recommendation to commit up to $50 million to Tennenbaum Direct Lending Fund VIII. OP&F currently invests in Tennenbaum Enhanced Yield Fund. Additionally, the board agreed to expand Wilshire Associates’ current investment consulting services to include private credit consulting. Prior to June, private credit managers were part of OP&F’s high-yield allocation. However, private credit is now a distinct asset class within the portfolio with a 5% asset allocation.

OP&F is a cost-sharing, multiple-employer public employee retirement system, serving approximately 27,000 active members and more than 30,000 retirees and their beneficiaries.

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