Asset Allocation

The Board of Retirement invests KCERA’s multi-billion-dollar investment portfolio based on the recommendations of staff. External investment professionals are hired to implement the Board’s investment directives, subject to the investment policies and guidelines outlined in the Statement of Investment Policy. An essential feature of the policy is the diversification of assets in order to minimize risk of loss and to maximize rate of return.

Diversification ensures that KCERA does not put “all its eggs in one basket.” Doing so would be very risky in certain market conditions. Therefore, KCERA allocates pre-determined percentages of its total fund into distinct investment categories called asset classes. Each asset class has its unique advantages; together they provide an effective hedge during volatility in individual markets.

KCERA hires multiple investment management firms for each asset class. The firms are given a “mandate” to invest a certain percentage of KCERA’s assets in their respective specialty areas. To assist in its evaluation of these managers, the Board has hired two investment consultants, Verus and Albourne America LLC, to provide investment analysis, education, recommendations and reporting. Although implementation of KCERA’s investment policies is carried out by external firms, ultimate responsibility and decision-making for the investment program lies with the Board of Retirement.

Below is a chart of KCERA’s asset allocation targets as of April 1, 2020. The KCERA portfolio was valued at $4.4 billion as of June 30, 2020.

Asset Class Target % Minimum % Maximum %
Equity 37% 32% 46%
Fixed Income 24% 20% 34%
Real Estate 5% 0% 10%
Commodities 4% 0% 6%
Midstream Energy 5% 0% 7%
Hedge Funds 10% 5% 15%
CE Alpha Pool 5% 0% 7%
Private Equity 5% 0% 10%
Private Credit 5% 0% 10%
Private Real Estate 5% 0% 10%
Opportunistic 0% 0% 10%
Cash -5% -7% -5%

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