How One Small Pension Fund Added $1 Billion in Value

https://www.institutionalinvestor.com/article/b1f16mbgypgmqm/How-One-Small-Pension-Fund-Added-1-Billion-in-Value?utm_medium=email&utm_campaign=The%20Essential%20II%2042219&utm_content=The%20Essential%20II%2042219%20Version%20A%20CID_374472ede3d6dcc456b2747c3faad089&utm_source=CampaignMonitorEmail&utm_term=How%20One%20Small%20Pension%20Fund%20Added%201%20Billion%20in%20Value



...By adopting a more strategic method of rebalancing,





...SBCERA’s “informed rebalancing program” launched in 2006. Since then, the program has added an extra $965 million to the portfolio, or about 1.25 percent in additional returns annually, according to a case study by fund CIO Donald Pierce, Muralidhar, and AlphaEngine co-CIO Sanjay Muralidhar.



...“Instead of letting a portfolio aimlessly drift until some happenstance trigger occurs, a clearly identified staff member was tasked with taking ownership of the asset allocation decision and making adjustments in an explicit, rules-based, and informed manner,” they wrote.

The rules for portfolio rebalancing were based on peer-reviewed academic research, and focused primarily on asset valuations. Under this regime, decisions “were not arbitrarily triggered, but rather provided staff’s best estimates of which assets were over/undervalued and in turn, over/underweighted within the board-approved ranges,” according to the paper.