St. Mary's County pension consultants recommend modest rebalancing; board approves moves

Patrick Wing, an investment consultant with Marquette Associates, told the St. Mary's County Sheriff's Office Retirement Plan board on April 24 that diversification helped the plan eke out a small gain in the first quarter despite a weak U.S. equity market.

"The diversification of the SORP was very helpful in Q1 at a time where U.S. equities were down almost 5%," Wing said, summarizing the brief quarterly performance update and the drivers behind relative results.

Wing said the plan began the year with roughly $157.6 million in assets and experienced a positive net cash flow of about $909,000 in Q1 and a net investment change of about $600,000, producing a return of about 0.4%, slightly above the policy index return of about 0.3%.

Wing highlighted that non‑U.S. equities, fixed income, infrastructure and other diversifying holdings outperformed U.S. large-cap equities in Q1. He also reviewed private markets activity: Carlisle (Carlyle) and TPG had begun funding new private managers and legacy private investments were returning capital, producing mixed flows across private equity and private credit.

The bulk of the meeting focused on a proposed modest rebalancing to bring the portfolio closer to policy ranges and to reduce concentration in large-cap U.S. stocks. Wing presented three manager/implementation options for reducing large-cap exposure: (1) switching the current Vanguard Value Index position to the active Vanguard Equity Income fund (which the consultant said historically holds more mid-cap exposure), (2) switching to the Fidelity Large Cap Value Index (which the consultant said tracks an index with a broader number of holdings and greater mid‑cap exposure), or (3) leaving the current index in place. Wing summarized pros and cons for each option, including fees and historical risk/return.

As part of the rebalancing recommendations, Wing said the consultant team proposed specific trades to restore policy ranges: modest redemptions from cash and short-term fixed income and a partial move back into equities. The consultant described the implementation in detail: reduce cash held outside principal by $100,000 and reduce the Allspring government money market holding by $100,000; a partial redemption of $800,000 from the Lord Abbett short-term fixed income manager; and reallocate roughly $1,000,000 back to equities (noted as the Vanguard Total Stock Market Index in the deck) with a small $250,000 redemption to Virtus to mitigate a small-cap overweight. Wing also recommended a minor trim among developed non‑U.S. managers (move some funds toward an underperforming active manager in that sleeve) to recapture a portion of the equity underweight.

Board members discussed manager selection and fee tradeoffs. One member said they favored the Vanguard Equity Income option for its historical downside protection and modest mid‑cap tilt; others noted the Fidelity index option would remove tracking error but forego active outperformance potential. Wing repeatedly framed the recommendation as a modest, tactical shift to reduce valuation-driven exposure to large-cap growth and increase mid‑cap exposure modestly; he said a fuller set of formal changes to U.S. equity structure would return to the board in June for final approval of related items.

Motion and vote: the board moved and voted on the consultant's rebalancing recommendations. The motion to approve the rebalancing recommendations was moved by Benetta Van Cleave, Chief Financial Officer for St. Mary's County, and seconded by John Walters, Citizen Representative. The board voted aye and the motion carried.

The board also had brief updates from managers on watch (William Blair remained on watch) and a private markets update noting reporting delays for some private real estate funds; the consultant said full private markets reporting would be available at the June meeting.

Wing closed by asking if there were any further questions; the board signaled readiness to revisit the broader U.S. equity structure in June.