ISERS board adopts small policy tweak, hears presentations from fixed‑income managers

The Imperial County Employees' Retirement System board voted Feb. 19 to amend its investment policy to show a 1% cash target and to separate a TIPS allocation from core fixed income. Trustees approved the change after hearing presentations from two fixed‑income managers and a portfolio consultant.

The change moves 1% of the plan's target allocation from TIPS to cash and adds an explicit 1% cash line to the policy, staff said. Board counsel and staff framed the adjustment as an administrative clarification to align the written policy with how the fund is managed today.

Why it matters: staff and consultants told trustees that while the plan's long‑term target return remains unchanged, liquidity will become more important as the system matures. Consultants showed that a modest cash buffer can help meet near‑term capital calls and benefit payments without forced sales of other assets.

Income Research & Management (IR&M) opened the presentations. Eric Mueller, presenting for the firm, said fixed income has become more attractive because of higher yields and that IR&M emphasizes bottom‑up security selection rather than trying to forecast interest‑rate moves. "What a time to be invested in fixed income. Rates are up, so returns are therefore gonna be up, as well," Mueller said.

Mueller said IR&M manages only cash bonds with no derivatives or leverage and described a modest yield advantage versus benchmarks driven by careful security selection and allocations to securitized products such as agency mortgage‑backed securities, ABS and CMBS. He said the firm is underweight long corporates and finding value in short corporates and securitized credit.

MacKay Shields' presentation, delivered by Steve Buckley, underscored a similar view that markets currently offer more yield than in recent years and that diversified, core‑plus portfolios can benefit from allocations across securitized products, corporate credit and commercial mortgages. "We run a core plus portfolio for ISERs," Buckley said, adding that the fund's yield to worst was just under 6% at the end of the quarter versus roughly 5% for the benchmark.

Board discussion included questions about TIPS allocations, manager fees for private market managers, and how rising Treasury yields and potential tariff or fiscal changes might affect returns. Trustee David Prince and others urged staff to provide clearer fee reporting for private managers; staff agreed to coordinate with the plan's administrative consultant to align fee detail in future packets.

Following the presentations, Trustee David Prince moved to adopt the proposed policy changes; the motion was seconded and approved by voice vote.

The board also received an informational update that Sixth Street has entered a strategic partnership with Northwestern Mutual; staff said the deal involves Northwestern taking a passive 7% stake and committing capital to Sixth Street but does not create a conflict with ISERS' existing allocations.

Trustees completed routine consent items and minutes earlier in the meeting, and the board recessed for a short break before continuing with other agenda items.