St. Mary's County OPEB posts 0.7% Q1 gain; consultant recommends shifting equity exposure and board approves $500,000 rebalancing

St. Mary's County OPEB Board, April 25 — Marquette Associates told the St. Mary's County OPEB Board on April 25 that the county's OPEB trust returned 0.7% in the first quarter of 2025 and recommended modest allocation shifts to reduce concentration in mega-cap growth stocks; the board approved a $500,000 rebalancing by voice vote.

Marquette Associates senior consultant Patrick Wing presented the performance update and said the trust began the quarter “with a just a shade under a hundred and 22 and a half million dollars.” He reported a positive net investment change of about $846,000 for Q1 and said diversification across asset classes produced modest outperformance versus the policy benchmark (roughly 30 basis points ahead for the quarter).

The consultant highlighted several drivers: an overweight to U.S. large-cap value and downside protection from some active managers offset losses in U.S. large-cap growth; private markets returned $1.65 million in distributions during the quarter, but Marquette characterized that amount primarily as the result of one private-debt fund liquidation and an outlier relative to recent quarters; private debt overall performed well. Wing told the board the cash position has been rebuilt and now covers multiple quarters of expected withdrawals.

Why it matters: the trust finances retiree health reimbursements for St. Mary's County employees and a shift in allocation can materially affect long-term funding status and near-term liquidity needs. Marquette said the portfolio's concentration in a small number of large-cap growth names increases vulnerability to downside in volatile markets.

The firm reviewed historical risk-and-return patterns and current valuations across large-, mid- and small-cap growth and value segments. Based on a 20-year valuation distribution and return-history analysis, Marquette proposed lowering the plan's relative exposure to the largest-cap, growth-oriented stocks and increasing mid-cap exposure. Options included switching the S&P 500 index exposure to a broader cap index (e.g., Russell 1000) or using SMID (small- and mid-cap) index strategies to raise mid-cap weight without materially increasing overall active management.

Marquette also noted manager-level issues. The firm reiterated that William Blair (the plan's dedicated small-cap value manager) remains on the watch list for underperformance and said the U.S. equity review scheduled for the coming months will address manager changes.

Board action: the board approved a rebalancing recommended by Marquette: a $500,000 partial redemption from the Lord Abbott Short Duration Income Fund to the Schwab U.S. Large Cap Value Index Fund. John Walters moved the motion; the motion was seconded and approved by voice vote (counts not specified). The motion was recorded as carried.

Other details Marquette provided: the consultant said private markets distributions in the quarter included a $1.65 million distribution driven by a Golub fund liquidation and that ongoing private-markets cash returns remain lower than in earlier years; fixed-income segments (TIPS and certain active investment-grade managers) outperformed while a short-duration manager's limited rate exposure reduced relative gains as rates fell. Wing told the board the current cash position—partly reflecting a recent county reimbursement—helps avoid forced sales to meet benefit withdrawals for at least roughly a year under current assumptions.

The board did not adopt any wholesale policy changes at the meeting; Marquette said staff would return with implementation options and detailed trade paths during the next full book presentation in June.