Kansas Public Employees Retirement System (PERS) has approved a plan to increase its allocation target to infrastructure and simultaneously decrease its allocation to real estate.
According to the $25bn (€22.3bn) pension fund’s meeting document, the plan involves raising the allocation for infrastructure from the current 3% of the total asset portfolio to 5% over the next three years, followed by a further increase to 8% in five or more years.
In contrast, the plan for real estate aims to gradually reduce the allocation from 15% to 12%.
The decision to increase the allocation to infrastructure and other real assets like timber was influenced by a recent asset allocation review, which highlighted their favourable diversification and return characteristics.
The review concluded that these asset classes can offer competitive risk-adjusted returns.
The increased allocation to infrastructure and other real assets will be funded by reallocating capital from real estate and yield-driven asset classes in the short term and from real estate, global equity, fixed income and yield-driven asset classes in the long term.
Kansas PERS will propose implementation recommendations to the pension fund board in November.
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