Allentown pension boards approve rebalancing to extend bond ladder after consultant reports strong 2023–24 returns

The Allentown Aggregate Pension Board on Feb. 18 voted to adopt a proposed rebalancing that trims U.S. equity holdings and uses part of the proceeds to extend the funds’ short‑term bond ladder.

The motion to adopt the rebalancing proposals for the Police, Fire and O & E funds was made on the record by a board member and seconded; the measure passed unanimously by roll call. Board members said the moves are intended to lock in higher short‑term yields while keeping a buffer of cash for benefit payments.

Why it matters: Marquette’s market update presented at the meeting showed large positive investment returns for 2023 and 2024 that materially improve the plans’ funding projections. The board’s rebalancing directs some equity proceeds into Sterling (a fixed‑income manager noted in the packet) to extend the ladder to maturities that better match net cash‑flow needs, while keeping some cash as a cushion.

Investment presentation and rationale Pat Wing (presenter) reviewed the quarter and January performance figures. The consultant summarized that U.S. equities produced modestly positive returns in the fourth quarter while developed non‑U.S. and emerging market equities were down; fixed income experienced downward pressure as interest rates rose in the quarter. However, the funds posted double‑digit returns for the 2024 year (presented as 12.4% for the Police fund and similar strong returns for Fire and O&E), which, when phased into actuarial smoothing, materially improves funding progress in projection exercises presented later by the actuary.

Wing outlined specific cash‑management recommendations from the packet: for Police, trim $3,000,000 from the Vanguard Total Stock Market allocation and use roughly $2.73 million to extend the Sterling ladder while returning about $270,000 to the money market; for Fire, redeem $1,900,000 from Vanguard and move about $965,000 into Sterling to extend the ladder; for O & E the report listed partial redemptions across several equity funds totaling approximately $145,000 to be directed toward the ladder. The consultant noted shorter‑term TIPS yields and the present opportunity to extend the ladder because 3‑year Treasury yields are higher than money market yields in the packet’s pricing.

Board discussion and vote Board members asked clarifying questions about cash troughs and the expected timing of real‑estate redemptions from the Morgan Stanley real‑estate account; staff noted that Morgan Stanley paid roughly 55% of a previously submitted redemption in Q4 and that further payouts were expected over the coming year. After discussion the board considered the three rebalancing proposals in a single motion (described in the meeting packet as the rebalancing moves on pages 10, 12 and 14, dated 02/18/2025). The motion was seconded and approved by roll call; no nays were recorded.

What comes next Staff and consultants will implement the partial redemptions and ladder extensions described in the packet and will continue to monitor additional real‑estate payouts from Morgan Stanley. Managers and staff also flagged a longer‑term discussion for later in 2025 about whether to maintain the 10% strategic target to real estate or to reallocate some of that target to infrastructure or other inflation‑sensitive assets.

Ending: The Aggregate Pension Board adopted the packet recommendations and directed staff and investment consultants to implement the rebalancing as described in the materials dated Feb. 18, 2025.