The $75 billion Oregon Public Employees Retirement Fund has a new allocation target for its alternatives portfolio and plans to invest up to $2.5 billion this year in assets including infrastructure, natural resources, agriculture and other “diversifying strategies”.
A spokesman for the Oregon State Treasury told Infrastructure Investor that the state’s investment council had approved a pacing plan that will increase OPERF’s alternatives portfolio to 15 percent of the total fund.
According to a document published online, OPERF will make five to 10 commitments this year to infrastructure and natural resources – which comprise its real assets portfolio – with ticket sizes ranging between $150 million and $250 million in both domestic and global funds.
“The alternatives portfolio was created as part of one of the lessons learned in the [global financial crisis] of 2008-09, which highlighted that there was equity risk across the portfolio,” the spokesman said in an e-mail. “The alternatives portfolio seeks less correlated opportunities across a number of asset types […] that tend to not be in lockstep with the markets.”
OPERF has ramped up its alternatives target from 5 percent when it launched the strategy in 2011 to 10 percent in 2013 and 12.5 percent in 2015. More than half of the fund’s $11.1 billion of alternatives commitments since its inception have been made over the past three years, according to the pension fund’s documents.
The alternatives portfolio had a $7 billion market value at the end of 2018, which represented 9.3 percent of OPERF’s total portfolio and was up $2 billion from the year before. Alternatives have generated a 7.3 percent net return since inception. Infrastructure has anchored the portfolio’s returns during this period, generating 6.3 percent over the past year, 9.6 percent over five years and 9 percent since inception.
In 2018, OPERF approved $1.52 billion of commitments to its alternatives portfolio, including $1.04 billion to infrastructure equity funds and $230 million to infrastructure debt. The infrastructure portion of OPERF’s portfolio has a current market value of $1.8 billion.
So far, in 2019, OPERF’s only infrastructure fund commitment has been $400 million placed with Brookfield Infrastructure Fund IV, a vehicle that has raised around $14 billion. Last year, the pension fund also committed $400 million to Global Infrastructure Partners IV, which has raised $13.5 billion and is expected to hold a final close later this year.