PERS committee hears Callan market outlook; approves ORP document change and a new Pathway private-equity series; Wellington removed from DC watch list

Callan consultants briefed the Public Employees Retirement System of Mississippi committees on capital market assumptions and performance for the MDC (Mississippi Deferred Compensation plan) and ORP (Optional Retirement Plan), and trustees approved a staff recommendation to commit to another private-equity series with Pathway Capital Management. The committees also removed the Wellington small-cap option from the DC plan watch list and gave initial approval to revise the ORP plan document to reflect an employer contribution rate change.

Callan consultant Alex Ford summarized the market environment for the year-end 2024 review and the firm’s 2025 assumptions. “The S&P 500 gained 25% for the full year,” Ford said, adding that a concentrated handful of large-cap growth names drove much of that return and that “getting to the Fed’s long-term target of 2% (inflation) has proved very difficult.” Ford told trustees that higher short-term yields have raised fixed-income returns prospectively while creating volatility in the nearer term.

Why this matters: Callan’s 10-year projections feed the system’s asset-liability and policy discussions. Callan’s Adam Lewinsky told trustees the system’s policy portfolio projects a 10-year geometric return of about 7.3% under the 2025 assumptions, with a roughly 53% probability of exceeding a 7% target over a 10-year horizon.

MDC and ORP review: Ford walked trustees through the MDC investment lineup and long-term manager performance, noting that most options have met objectives on a five‑year basis and that the plan’s weighted average expense ratio is low — about 26 basis points compared with a market median of 84 basis points. On the ORP side, Callan outlined differences among Corebridge, Voya and TIAA platforms and highlighted that TIAA’s lineup includes a direct-core real estate sleeve more similar to the DB plan.

Watch list action: Staff recommended removing the Wellington small‑cap fund from the defined‑contribution watch list after performance stabilized; trustees moved, seconded and approved that removal by voice vote. The committee also left Loomis Sayles large‑cap growth on continued watch while staff monitors improvement.

ORP plan‑document change: Staff asked for initial approval of a technical change to the ORP plan document to reflect the scheduled employer contribution rate increase under current law (PERS rate moving from 17.9% to 18.4% in July). Trustees moved, seconded and voted aye on initial approval; staff indicated the typical follow-up steps for formal adoption would follow the committee’s initial approval.

Private‑equity pacing and Pathway commitment: Staff reported private‑equity pacing and cash‑flow trends showing the program running cash‑flow positive in recent years and recommended continuing the multiyear commitment cadence. Jason Clark, portfolio manager covering alternatives, recommended a 2025 Pathway series with a three‑year commitment cadence totaling $720 million ($240 million per year). Staff noted the series would be an amendment to an existing relationship, not a new manager selection. Trustees moved, seconded and approved the commitment by voice vote.

Fund and capital‑markets context: Cowen’s market update and Callan’s capital market presentation gave trustees context for expected returns by asset class: Callan trimmed expected returns for public equities and core fixed income modestly from the prior year, raised the outlook for core real estate slightly, and reiterated that public‑market yields now provide better prospective income than in the low‑rate environment of 2020–2021. Callan emphasized that projected returns are net of fees and that active management could add alpha beyond the passive assumptions.

Manager outreach and due diligence: The meeting included manager presentations from Marathon, Arrow Street (AeroStreet) and Baillie Gifford. Marathon described its capital‑cycle, longer‑horizon approach and noted short‑term headwinds from the recent run‑up in large‑cap growth in the U.S. AeroStreet summarized its systematic, fundamentals‑driven quantitative process and discussed country‑and‑sector over/underweights that added value in 2024. Baillie Gifford acknowledged multi‑year underperformance for its international growth mandate, outlined personnel and process enhancements, and argued the current portfolio’s earnings and return‑on‑capital characteristics support an improved outlook.

Trustees’ next steps: Staff and consultants said they will continue monitoring managers on the DC watch list, report back on private‑equity pacing and Pathway implementation, and bring final legal documents for the ORP plan change to a subsequent meeting for final approval. The committee adjourned after the presentations and the panel Q&A.

Ending: Trustees heard a broad set of investment and governance items ranging from defined‑contribution plan lineup and fees to capital‑markets assumptions and private‑equity pacing. Staff and consultants will return to the committee with follow‑up materials and formal documents consistent with the approvals recorded today.