Asset AllocationJuly 26, 2022

San Bernardino County Moves to Trim Foreign Stocks

The California county’s plan, already low on equities, reduces its stock allotment further due to the world’s troubles.

Reported by Larry Light

Investing abroad has been a longstanding trend among asset allocators seeking greater diversification. But the $14.2 billion San Bernardino County Employees’ Retirement Association is pulling in its international stock investments and shifting the money to domestic equities.

The program, as of March, has 13.2% of its assets in domestic equities with a target of 17%, and is drawing down its international developed market equity and emerging market debt holdings. Foreign stock is 11.7% and EM debt 6.7%.

The asset realignment seeks to adjust to “a world where supply chains are realigned due to macro political factors, trade flow, and a deglobalization trend away from China,” says a statement from the plan.

“Sanctions on Russia highlight the global sensitivity to a USD-based system, potentially increasing the likelihood of separate spheres of influence between the U.S. and China,” it explains. “The regulatory reset and similar top-down initiatives may incite further volatility on the country’s long transition path, creating a tail-risk for market and economic contagion.”

The San Bernardino plan has a remarkably low amount of stocks; they make up about a quarter of its assets. The fund is concentrated on income generation amid today’s low returns, and is maintaining cash on hand at 7.4%, which it says it might use for opportunistic purchases.

Public plans typically have a higher allotment of equities—47.2% of assets as of last year, according to the Public Plans Data list, with fixed income the next largest category, at 22%.