The San Diego City Employees’ Retirement System (SDCERS), which recently planned to increase its infrastructure allocation target from 3% to 4%, is planning to invest the new capital into core assets.
The San Diego City Employees’ Retirement System (SDCERS) is making its debut in core infrastructure investments by deploying capital from its recently increased infrastructure allocation target to these assets.
Last year, IPE Real Assets reported that SDCERS is planning to increase the infrastructure allocation target from 3% to 4%, a move the $10.3bn (€9.3bn) pension fund expected will help provide inflation protection.
As of the third quarter of 2023, the pension fund’s infrastructure portfolio, valued at $174.1m, comprised core-plus, value-add opportunistic strategies.
The pension fund’s cumulative commitments which include unfunded commitments amounted to $279.1m during the period.
SDCERS has proposed in a board meeting document that all the new capital from the allocation increase should be placed into a core strategy, a move it expects would help enhance portfolio diversification, lower-risk profile, reduce dispersion of returns, greater control over portfolio risk parameters and avoiding double layer of fees.
Once the new core infrastructure strategy is approved, the pension fund will begin a search for one or more core open-ended fund managers. Formal recommendations for approval of these managers are expected in the second half of 2024.
The core infrastructure investments are expected to generate net internal rate of returns of 7% to 9% with a leverage amount varying from 40% to 90%.
The pension fund identifies areas like utilities, power generation, transportation, and public-private partnerships as core infrastructure.
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