The Oregon Investment Council, overseeing the $77.9bn state pension fund, has tripled its alternatives target allocation at its April meeting.
The move, from 2.5% to 7.5%, creates a nearly-$4bn potential opportunity for new managers.
The increase is split between two portfolios, diversifying strategies and risk parity. Within the overall alternatives allocation, the council increased its diversifying strategies sleeve from 5% to 7.5% and added risk parity as a new standalone asset class with a 2.5% target allocation.
Oregon’s diversifying strategies portfolio can contain relative value, macro, arbitrage, and long/short equity investments. Its objective is to invest in strategies with returns uncorrelated with those of the total portfolio.
The portfolio was increased to 5% in June 2015, having been implemented in January 2011 when diversifying strategies were first included.
Since the 2015 increase, Oregon has invested in Aspect Capital Core Diversified Programme, AQR Managed Futures Strategy, BlackRock Style Advantage Fund and JP Morgan Systematic Alpha Strategy,
While Oregon’s diversifying strategies portfolio is intended to have zero-to-low correlation to its other traditional asset classes, risk parity is differentiated by its positive correlations to public equity and fixed income; which is part of the reason why it has been added as a standalone portfolio.
Callan assisted with the asset allocation revisions and TorreyCove Capital Partners serves as Oregon’s specialty consultant for alternatives, covering the diversifying strategies sleeve. It is unclear whether TorreyCove’s services will be expanded to cover that portfolio.
The next steps are “to be determined,” director of communications James Sinks said. “The council had the policy-level conversation, and an implementation strategy will now be developed,” he added.
To facilitate the alternatives increase, the global equity portfolio target will be reduced from 37.5% to 32.5%.
Oregon ups alternatives target by $4bn on HFM InvestHedge.