OP&F investment notes, February 2021

Notes from the Investment Committee meeting on Feb. 24, 2021

Portfolio value:

The OP&F portfolio was valued at $17.17 billion as of Feb. 23.

OP&F sees 9.2% return for 2020

OP&F’s general investment consultant Wilshire presented the 4th Quarter Performance Review for periods that ended on Dec. 31, 2020, that showed that the portfolio saw a 9.21% return for the year. The return was above the actuarial assumed rate of return, which is set at 8.0%, but lagged the total portfolio policy benchmark return of 9.84%. OP&F’s allocation to Midstream Energy Infrastructure (MLPs), which turned in a dismal -23.4% for 2020, put downward pressure on the total portfolio’s return. In addition, Wilshire pointed out OP&F’s target allocation to the strong performing U.S. equity asset class fell within the lowest quartile weighting among its peer public plans. Wilshire’s report also showed that OP&F outpaced its policy benchmark for the three (8.23% vs. 7.58%), five (9.95% vs. 9.18%) and 10-year periods (9.10% vs. 8.11%).

Board approves changes to non-U.S. equity portfolio

OP&F’s non-US equity portfolio will continue to change following the asset allocation study approved in late 2020. That study lowered the target allocation for non-U.S. equity to 14% of the total portfolio. The mix of managers within the asset class will move to 85% large cap managers and 15% small cap managers. Currently the mix is 75/25 in favor of large cap. The existing managers will remain in place with some allocation adjustments. A search for an additional international small cap manager is well underway with a hiring recommendation expected in March.

The non-U.S. equity portfolio for OP&F was valued at $3.0 billion, or 17.8% of the total portfolio at Jan. 31, 2021.

Up to $60 million approved to new Cortland real estate fund

Following a recommendation from The Townsend Group, the OP&F Board approved a real estate commitment of up to $60 million to Cortland Enhanced Value Fund V. This is a closed-end, value-add apartment fund that will focus on growth markets in the U.S. southeast and southwest regions. This marks OP&F’s first real estate commitment of 2021 and is within the tactical portion of the real estate portfolio. OP&F is also an investor in the Cortland Partners Growth and Income Fund. The OP&F real estate portfolio was valued at $1.6 billion, or 9.6% of the total portfolio at Jan. 31, 2021. OP&F’s target for real estate is 12% of the total portfolio.

Posted 2/25/2021