"If we went with these changes, what's the worst case scenario?" pension board member
"The worst case is the same worst case we would have with the existing portfolio. So it's no different than it was before," responded
"What we've done is by diversifying, we can get lower risk with the same return, or we can get higher return with the same risk. Here we're opting to get higher return with the same risk."
That's a much more optimistic assessment than the one a national expert gave The Commercial Appeal last month, shortly after the board began discussing the proposed reallocation. "The portfolio that you described, it is clearly one that's going to be more volatile or more risky," said
The city of
Cities around the nation are investing pension money in more aggressive investments in the hope of winning higher returns, Fuerst said.
The pension board had previously approved one part of the reallocation, a decision to raise the percentage of real estate assets in the fund from 5 percent to 10 percent.
The remaining changes approved Thursday became final with the pension board vote and will not go before the
Here's a summary of the other changes:
The city would sell a large portion of its U.S. stocks and bonds and increase its holdings of foreign stocks from 22 percent of the portfolio to 31.7 percent. The fund would also invest 13.4 percent of the portfolio in bonds from abroad.
The pension fund would invest 4.4 percent of its portfolio in private equity companies and 4.2 percent of its holdings in hedge funds.
These numbers are "targets" -- the actual percentage of investments in each class can change depending on various factors, such as investment performance.
(c)2014 The Commercial Appeal (Memphis, Tenn.)
Visit The Commercial Appeal (Memphis, Tenn.) at www.commercialappeal.com
Distributed by MCT Information Services