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Third-quarter markets lift MCERA to $833.5 million; managers mostly outperform peers
Summary
Investment consultant Callan and staff reported the pension portfolio reached a record $833.5 million after a strong year and quarter for markets. The board heard a manager‑by‑manager review, approved a plan to deploy additional real estate allocations beginning Jan. 1, and was briefed on rebalancing and liquidity processes.
Mendocino County Employees Retirement Association trustees received a third‑quarter market and performance review on Nov. 4 and heard that the pension fund reached a record $833.5 million as of Sept. 30, 2025. Callan and MCERA staff said broad market gains and strong fixed‑income returns drove the result and that staff will begin a measured deployment into the fund’s new real‑estate allocation early next year.
"The last fiscal year the program was up 12.3%. The first quarter of the new fiscal year, the portfolio was up 5.4%," Callan consultant Claire told trustees when summarizing the quarter. She said US large caps and small caps both posted notable gains (S&P 500 approximately +8% in Q3, Russell 2000 +12% Q3) and that emerging markets and real asset sectors also contributed positively.
Callan highlighted that the asset allocation remains within policy ranges and that staff’s upcoming implementation plan will likely deploy between roughly $10 million and $16 million from liquid public equities into the real‑estate allocation starting Jan. 1, 2026. Robert, MCERA’s investment staff, explained timing will depend on cash distributions from existing managers (Bearings, REEF) and delayed statements from JPMorgan; those cash flows will determine whether staff draws briefly from liquid equities before redeploying when receipts arrive.
Manager performance: Callan reported active small and mid‑cap managers underperformed their benchmarks in the most recent quarter because strong returns were concentrated in non‑profitable small companies; however, Callan said MCERA’s active managers fared well versus their peer groups. Fixed income managers Dodge & Cox and PIMCO outperformed the Bloomberg Aggregate benchmark in the quarter, and REEF and JPMorgan returned positive results in real assets and infrastructure.
On implementation policy, Callan noted MCERA holds minimal cash in the investment account and uses the county treasury pool for day‑to‑day liquidity. "Historically cash has been a drag; we pull from invested assets as cash is needed to pay benefits," Claire said. Trustees discussed the tradeoffs and were advised that a permanent cash allocation is more common in portfolios with high illiquid alternative exposure.
What’s next: staff will execute the planned rebalancing in the first quarter of 2026 and present a fuller real‑estate and infrastructure update at the December board meeting. JPMorgan’s final quarterly return (received after materials were published) will modestly increase the reported total‑fund return for the quarter when the December report is posted.
