NEW YORK (Reuters) - New York pension officials may shift money from equities to bonds to reduce market risk and ensure liquidity in their $216 billion fund, the system’s chief investment officer said on Monday.
An asset allocation study that should be approved by the end of the year will likely call for a decrease of several percentage points in the New York State Common Retirement Fund’s allocations to equities, Anastasia Titarchuk said at the Reuters Global Investment Outlook 2020 Summit in New York.
The assets instead are likely to go into investment-grade fixed income, she said, such as U.S Treasuries. About half the assets of the third-largest U.S. pension system are in global equities, and about 25% are in bonds, she said.
U.S. stocks hit record highs on Monday on hopes of a U.S.-China trade deal and an improving domestic economy.
But Titarchuk said in the long run she is concerned about a lower likelihood of high returns for stocks and their long bull run. Her fund is obliged to pay out about $1 billion in benefits every month.
“At this point in the cycle we’re much more concerned about liquidity,” she said. “If we have a downturn, I don’t want to sell equities on the low.”
Titarchuk also said the fund is likely to keep its private equity allocation around 10%, with managers’ high fees discouraging the idea of raising that percentage.
“I actually give a little pause when I see the entire market move in one direction. To me that’s more of an indication that it’s a crowded trade,” she said in reference to the growing popularity of private equity for large investors.
(For other news from the Reuters Global Investment Outlook 2020 Summit, click here)
Titarchuk was appointed CIO of the retirement fund in August by New York State Comptroller Thomas DiNapoli, after serving on an interim basis. DiNapoli has used the fund’s financial clout to raise issues such as calling on energy companies to disclose more about the business risks they could face from climate change.
Titarchuk reiterated the fund’s view that investors should not divest from stocks seen as controversial, such as Chinese technology companies whose products raise privacy concerns, or energy companies that play a role in climate change. Better, she said, to use the shares to continue dialogue with executives.
“You can always find the next devil that needs to be sold,” she said.
Reporting by Ross Kerber and Lawrence Delevingne in New York; Editing by Dan Grebler