Maine Pension Plan Eyes Asset Allocation Shift

The proposal’s aim is to reduce risk and enhance income, report to trustees says.



The Maine Public Employees Retirement System is looking to reduce risk assets and boost income-generating ones, at a gradual pace between now and 2028.

In a proposal from MainePERS CIO James Bennett, the plan would increase its allocation to U.S. government securities to 10% from 7.5%, and make the same shift for what the report calls alternative credit—which includes junk bonds, bank loans, and asset-backed securities.

At the same time, Bennett calls for lowering the allocation to private equity to 12.5% from 15%, and shrinking investment-grade corporate bonds to 5% from 7.5%.

Obviously, U.S. Treasury debt and its ilk are viewed as risk-free. Bennett does not mention his specific rationale for junk and other alternatives credits, but their defaults have been low for some time—and they tend as a class to have relatively high yields.

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PE is the most popular alternative investment among institutions these days, although the hazard always exists that some of its deals could go sour, as has happened historically. Meanwhile, the spread between investment-grade corporate and Treasury bonds is narrow: 1.26 percentage points as of last week. (Again, no analysis for these proposed alterations was in the report.)

For the Treasury component, the proposal calls for a 50-50 split between standard Treasury obligations and Treasury inflation-protected securities. Right now, TIPS have 90% of the Treasury allocation.

Bennett writes in his report that “these proposed changes will lead to a decrease in expected portfolio risk, with little to no impact on expected returns, based on current capital market expectations.” The report went to the system’s trustees.

Two consulting firms, Cambridge Associates and Cheiron, helped formulate the plan. Bennett’s report says Cheiron performed a simulation analysis “showing the range of outcomes for funding status, contribution rates, and liquidity associated with different portfolio risks.”

MainePERS is pretty well-funded. The major program in the system, for state employees and teachers, is 82.1% funded, as of last June 30, with the one for local governments at 91.1%.  

Related Stories:

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Maine Picks Deputy James Bennett as CIO

MainePERS CIO Deliberates Withdrawal of PE Commitments

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Wall Street Doesn’t Seem Very Impressed With Musk’s Bid for Twitter

The social media firm’s stock hasn’t risen much since his offer was unveiled.

Should investors take Elon Musk’s bid for Twitter seriously? The billionaire Tesla chief just launched a $41 billion cash offer for the social media company, but Wall Street is underwhelmed.

Twitter stock had just a small pop this morning and the share price has wobbled around since. At a little more than $47, it is nowhere near Musk’s bid of $54.20 per share. The news broke after his Thursday SEC filing

Before this, Musk’s investment interests had been mostly confined to cryptocurrencies and meme stocks. He is a favorite of the Reddit stonks crowd. Musk recently bought a 9.2% stake in Twitter.

Musk claims he can retool Twitter, whose stock has slipped by a third from an all-time high in November. Twitter’s dip comes amid an overall market drop and criticism of the platform for slowing growth and allegedly censoring some users’ views, among other knocks. Note that Musk’s bid is still far below Twitter’s high. Musk said the company he has often criticized must go private to make effective changes.

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Adding to the drama is Musk’s threat to sell his entire Twitter stake if his offer is not accepted. His SEC filing included a letter to Twitter’s chair, Bret Taylor, saying that he “would need to reconsider my position as a shareholder.” That could hurt the share price.

Musk is the world’s wealthiest person, according to Forbes, with an estimated net worth of $268 billion. That means he can easily afford to pay for Twitter out of his own pocket and remain at the top of the list. No. 2 Jeff Bezos, of Amazon fame, is worth $179 billion.   

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