Does PERA invest in gold?
PERA has investments related to gold in various portfolios. Gold exposure often resides in a number of our stock and bond portfolios.
Why doesn't PERA hold more cash?
PERA holds cash for the sole purpose of paying benefits and meeting other short-term obligations. Our investment strategy is to remain fully invested at all times while maintaining sufficient short-term liquidity.
How is the allocation to various asset classes determined?
The PERA Board determines the strategic asset allocation policy for the fund. The asset allocation policy is determined by an intensive asset/liability analysis. Expected investment returns, risks, and correlations of returns are considered. The characteristics of the fund’s liabilities are analyzed in conjunction with expected investment risks and returns. The targeted strategic asset allocation is designed to provide appropriate diversification and to balance the expected total rate of return with the volatility of expected returns.
How often is the asset allocation policy to various asset classes changed?
An asset/liability analysis is performed every three to five years, or more frequently if necessary.
Does the allocation to stocks stay the same?
The allocation to stocks and PERA’s other asset classes is periodically reviewed by the PERA Board. Changes in allocation tend to be small and gradual. For example, the Board changed the allocation to stocks from 55 percent to 53.5 percent of the total fund as of July 1, 2016.
How does PERA manage risk?
The risk of PERA's investments is largely determined by the PERA Board’s asset allocation policy. The Board also has an active risk policy.
When will annual return data be available?
PERA’s final annual returns are available with PERA's audited financial statements, typically June of the following year. Before year-end results are finalized, PERA asks for audited financial statements from the general partners in private equity and real estate partnerships. These are usually received approximately four months after year-end.
Is PERA concerned about inflation?
PERA’s portfolio is well diversified and has investments like real estate and commodities that are expected to perform well if inflation rises. Certain inflationary environments could have a negative impact on the overall portfolio for a period of time.
What is in the Opportunity Fund?
The Opportunity Fund was created to pursue investments that do not fit into the other asset classes: Global Equity, Fixed Income, Private Equity, and Real Estate. Currently, the Opportunity Fund holds investments in timber, tactical, credit, and other opportunities, and risk parity, multi-strategy, and global macro.
What percentage of PERA’s assets are managed internally?
PERA manages more than 56 percent of its investments internally where PERA staff has the expertise and resources to do so successfully. By using in-house investment professionals, PERA saves more than $35 million every year.
Why aren’t more investments managed in-house?
External managers are hired for numerous reasons; they may have deeper resources in smaller, niche markets or they may have particular strategies that complement our internal portfolios. PERA measures external manager results after taking into account management fees. External and internal managers are held to similar performance standards. The goal is to deliver attractive performance while accounting for risks and manager fees.
What does PERA do when market returns are negative?
PERA invests for the long term. The PERA Board carefully considers both risk and opportunity when determining the strategic asset allocation policy. Portfolio performance reflects market performance in large part. For the period ending December 31, 2016, the portfolio has returned 5.2 percent over 10 years (net-of-fees) and 9.8 percent over 35 years (gross-of-fees). PERA does not attempt to make large, tactical moves to add value. Tactical moves may be both high risk and subject to costly failure.
Does PERA have concentration in any one stock?
The short answer is no. The stock portfolio is well diversified. Colorado statutes include limitations on how much PERA may own of a particular stock. In addition, PERA determines portfolio guidelines for managers that foster diversification.
Are derivatives used in the PERA portfolio?
Yes, various derivatives are utilized in PERA’s portfolio. Each asset class has policies and manager restrictions that govern the types of investments that can be included in PERA portfolios and how these investments are to be deployed. The use of derivatives is carefully monitored on a routine basis.
How is the total fund’s performance evaluated?
The PERA Board approves all benchmarks used for performance comparison purposes. The benchmark for the total fund is the Policy Benchmark, which is derived using the asset class target weights and each of the asset class benchmarks.
How does PERA measure its investment results?
A policy benchmark is used to measure investment performance. The policy benchmark is a combination of the asset class benchmarks at the target weights set by the Board. The policy benchmark is revised when the Board changes target weights or asset class benchmarks. Since it was created, the policy benchmark has been revised after the completion of three asset/liability studies. It has also been revised to reflect the creation of the Opportunity Fund, the combination of International and Domestic Equity into one Global Equity asset class, and the transition to a more international Global Equity portfolio. There have also been changes to asset class benchmarks.
How does PERA audit the Private Equity portfolio?
Private Equity includes private equity limited partnership funds with various strategies including: buyout, venture capital, generalist debt, mezzanine debt, distressed debt, secondary funds, fund-of-funds, and energy-related strategies. PERA primarily invests as a limited partner in these funds. PERA reviews audited financial statements for each fund. Due to timing issues relating to when this information is provided to PERA by a small number of the partners and the time frame of the audit of PERA’s financial statements, a small number of audited financials are not received by PERA by the time PERA’s financial statements are released. PERA does receive audited financial statements on these investments and due to the timing, they are incorporated into the next year’s financial statements.