Wisconsin Reviews Strategy Implementation

(August 10, 2010) — Despite reports asserting the State of Wisconsin Investment Board (SWIB) has put its risk-parity implementation on hold, officials from the board deny the assertion, instead claiming the strategy has already been approved and that the board is simply waiting for its consulting firm to review implementation.

SWIB is waiting for its Cambridge, Massachusetts-based investment consulting firm NEPC, which was hired earlier this year by the board on a project basis, to review implementation of inflation-protected strategies, said Hearing.

“We first approved this asset allocation in January, and we knew this would be a very slow process,” Vicki Hearing, SWIB public information officer, told ai5000, noting that the board of trustees expects a meeting with NEPC as early as September.

NEPC will be looking into opportunities and pricings available, and the board expects NEPC to complete its full review at the end of fall.

The leverage and inflation-protection strategies are part of SWIB’s new allocation targets, which the board adopted in January to achieve an asset allocation of 104% of its $64.6 billion core fund. The target allocation incorporates 28% US equities, 25% international equities, 26% fixed income, 7% TIPS, and 6% each private equity, real estate, and absolute return and multiasset strategies, according to its strategy submitted by Chief Investment Officer David Villa and Executive Director Keith Bozarth.

In recent news, SWIB’s $64.6 billion diversified core fund — allocated to domestic and international equities, fixed income, real estate and private equity — returned 13.3% for the year ended June 30. The return outperformed its customized benchmark’s 12.1% return.

For the first half of the year, the core fund returned -3.1%, compared with its custom benchmark return of -3%. Meanwhile, during the five- and 10-year periods ended June 30, the core fund returned 3.3% and 3.7%. respectively.

The system oversees a total of $74.4 billion.