Article XVI, Section 17 of the Constitution of the State of California provides that “Notwithstanding any other provisions of law or this Constitution, the Retirement Board of a public pension or retirement system shall have plenary authority and fiduciary responsibility for investment of monies and administration of the system….” Article XVI, Section 17(a) further provides that “the Retirement Board of a public pension or retirement system shall have sole and exclusive fiduciary responsibility over the assets….”
SCERS maintains an overall investment policy designed to achieve a diversified investment portfolio. An integral part of the investment policy is the strategic asset allocation, which is designed to provide an optimal mix of asset classes with return expectations that correspond to expected liabilities. The strategic asset allocation also emphasizes maximum diversification of the portfolio to protect the System from the possibility that a particular asset class may experience poor investment performance in a given period.
SCERS prepares a review of the year’s investments in order to summarize the major events and developments of the past year, including investment performance; highlight the decisions that were made, the rationale for those decisions, and the direction(s) established going forward; and preview the investment program projects, issues, and objectives for the year to come.
SCERS utilizes the services of three investment consultants. The general consultant, Verus Advisory, provides advice on investment strategy and implementation, asset allocation, investment manager selection, and performance reporting. The alternative assets consultant, Cliffwater, assists with the development of the strategic plans for the alternative asset classes, manager selection, and performance reporting. The real estate consultant, Townsend Group, assists with the development of the strategic plan for the real estate portfolio, manager selection, and performance reporting.
Enacted in 2016, California Assembly Bill 2833 (AB 2833) mandates that California public pension or retirement systems require each alternative investment manager with which they contract to make annual disclosures of fees and expenses charged to the retirement system. The disclosures are required for fund investments made after January 1, 2017, with reasonable efforts for fund investments made prior to 2017. AB 2833 also mandates that the fund publicly disclose such information on an annual basis at an open meeting in an effort to bring transparency to alternative assets investments.