Key Takeaways
- • The Oregon Investment Council (OIC) adopted a new asset allocation policy for the Oregon Public Employees' Retirement Fund (OPERF) that reduces private equity from 20% to 19% and lowers real estate from 12.5% to 10%, while raising public equity from 27.5% to 26% and fixed income from 25% to 20%.
- • The OIC projects annualized forecasted returns of 7.3% under the new targets, above the fund's assumed rate of return of 6.9%, with the goal of eliminating a funding deficit within 10 years.
- • The policy establishes credit as a standalone asset class at a 7.5% target, shifting assets from existing fixed income and opportunity portfolios.
- • Real assets allocation rises from 7.5% to 10%, reflecting the asset class's best five-year annualized return of 12.23%, the strongest among Oregon's holdings.
- • OPERF managed $106.9 billion in assets as of December 31, 2025, and the changes follow a multi-year review and criticism over under-allocation to public markets.
Summary
The Oregon Investment Council announced Wednesday an overhaul of its asset allocation policy for the Oregon Public Employees' Retirement Fund, reducing exposure to private equity while increasing public-market investments. The change follows a multi-year evaluation of the pension fund's investment strategy, risk profile and long-term obligations. The OIC, which first invested with Kohlberg Kravis Roberts & Co. (now KKR) in 1978, has been criticized in the state for under-allocating to public markets and for resulting underperformance.
The new policy sets targets of 26% public equity, 20% fixed income, 19% private equity, 10% real estate, 10% real assets, 7.5% diversifying strategies and 7.5% credit. Compared with the prior targets of 27.5% public equity, 25% fixed income, 20% private equity, 12.5% real estate, 7.5% real assets and 7.5% diversifying strategies, the policy also drops the opportunity portfolio and cash-with-overlay targets to zero. As of July, the fund held 24.1% in public equity, 23% in private equity, 20.6% in fixed income, 13.1% in real estate, 10.6% in real assets, 5.8% in diversifying strategies, 2.6% in an opportunity portfolio and 0.1% in cash with overlay.
The OIC said the policy is designed to distribute risk more evenly across the portfolio and to raise projected future earnings, with the goal of eliminating a funding deficit within 10 years. It stated the targets could generate annualized forecasted returns of 7.3%, exceeding the fund's assumed rate of return of 6.9%, which it said is the return needed to meet liabilities.
State Treasurer Elizabeth Steiner had supported the change in a letter last year, acknowledging that private equity has historically added significant value while agreeing with reducing the allocation toward the OIC's 20% target. State staff had begun lowering the private equity allocation from 28% in 2023. In a statement when the allocation was released, Steiner said she supported the council's decision to "dial back on private equity and target more of our investments toward fixed income and public equities."
The policy also establishes credit as a standalone asset class, shifting investments from existing fixed income and opportunity portfolios to provide greater flexibility in managing credit exposures. Real assets, Oregon's best-performing asset class over the past five years with a 12.23% annualized return, will receive a larger allocation. OPERF, managed by the OIC and the Oregon State Treasury, held $106.9 billion in assets as of December 31, 2025.
The new policy sets targets of 26% public equity, 20% fixed income, 19% private equity, 10% real estate, 10% real assets, 7.5% diversifying strategies and 7.5% credit. Compared with the prior targets of 27.5% public equity, 25% fixed income, 20% private equity, 12.5% real estate, 7.5% real assets and 7.5% diversifying strategies, the policy also drops the opportunity portfolio and cash-with-overlay targets to zero. As of July, the fund held 24.1% in public equity, 23% in private equity, 20.6% in fixed income, 13.1% in real estate, 10.6% in real assets, 5.8% in diversifying strategies, 2.6% in an opportunity portfolio and 0.1% in cash with overlay.
The OIC said the policy is designed to distribute risk more evenly across the portfolio and to raise projected future earnings, with the goal of eliminating a funding deficit within 10 years. It stated the targets could generate annualized forecasted returns of 7.3%, exceeding the fund's assumed rate of return of 6.9%, which it said is the return needed to meet liabilities.
State Treasurer Elizabeth Steiner had supported the change in a letter last year, acknowledging that private equity has historically added significant value while agreeing with reducing the allocation toward the OIC's 20% target. State staff had begun lowering the private equity allocation from 28% in 2023. In a statement when the allocation was released, Steiner said she supported the council's decision to "dial back on private equity and target more of our investments toward fixed income and public equities."
The policy also establishes credit as a standalone asset class, shifting investments from existing fixed income and opportunity portfolios to provide greater flexibility in managing credit exposures. Real assets, Oregon's best-performing asset class over the past five years with a 12.23% annualized return, will receive a larger allocation. OPERF, managed by the OIC and the Oregon State Treasury, held $106.9 billion in assets as of December 31, 2025.
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