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Council adopts amendments to pension investment policy; committee recommends global bonds and ESG‑aligned mid‑cap fund
Summary
After a briefing from investment advisor David Lytle, State College Borough Council voted to adopt changes to the defined‑benefit pension plans' investment policy, including adding a dollar‑hedged global credit bond fund, an intermediate‑term Treasury index and a mid‑small cap ESG manager for domestic equities.
Council heard a presentation on May 12 from David Lytle, partner and chief investment officer at the borough's investment adviser, on the performance and recommended changes to the borough’s two defined‑benefit pension plans. The investment committee recommended amendments to the investment policy statement that council subsequently adopted.
Lytle summarized recent performance and the plans' strategic posture. He said the two plans together returned about 11.4% in 2024 and 15.8% in 2023 and reiterated a long‑term, diversified approach. "We are very much long term investors with our strategy," Lytle said.
Recommendations the council approved included:
- Adding the Vanguard Global Credit Bond Fund (dollar‑hedged corporate credit exposure) and a Vanguard Intermediate‑Term Treasury Bond Index to expand fixed‑income diversification.
- Introducing a Boston Trust Walden mid‑cap strategy that excludes fossil‑fuel companies (an ESG‑aligned manager) as a complement to the borough's existing mid‑/small‑cap passive exposure.
- Replacing or supplementing the existing international active fund with a lower‑cost international index fund to broaden developed‑market exposure while lowering fees.
Council discussion and vote
Council members asked about tariffs, currency risk and the composition of the proposed global bond holdings; Lytle said the recommended global-credit fund holds corporate paper across geographies and is dollar‑hedged to remove currency volatility. Councilor Balachandran asked for an ESG option; Lytle and staff proposed the Boston Trust Walden mid‑cap as a first step that excludes coal, oil and natural‑gas exposures while seeking to preserve performance. The investment committee had reviewed the recommendations at its May 7 meeting and recommended approval.
Council moved and adopted the investment policy amendments by voice vote. Staff said it would follow up to execute custodial arrangements and updated policy documents with the adviser and custodian.
Ending
The council's action gives staff and the adviser authority to implement the recommended fund changes and monitor the new allocations alongside the existing portfolio.
