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CapTrust tells Arapahoe County board that diversified asset mix and contributions are driving pension recovery
Summary
CapTrust presented the county retirement plan's asset strategy and recent performance, saying the fund has been deliberately diversified to meet a 7.25% assumed return while limiting downside risk; the plan generated a 9.7% return through Sept. 30 and has benefitted from higher county contributions.
Ben Colucci, retirement plan administrator for Arapahoe County, opened the session by asking investment consultants from CapTrust to review the retirement plan's assets and market outlook. Andy Bridal, an investment advisor with CapTrust, said the plan's long-term objective remains the same: to meet an assumed rate of return of 7 and a quarter percent while taking the lowest risk necessary. "Our goal and the approach of this board... is to do that in the most efficient, or lowest risk manner possible," Bridal said.
CapTrust described the portfolio as roughly 60% targeted to capital appreciation (growth-oriented public and private equities) and 40% to capital-preservation assets (fixed income and other ballast) to smooth volatility. Paul Schrader (CapTrust) and Bridal emphasized a strategic, long-term approach rather than short-term tactical moves; they highlighted manager and vintage-year diversification for private investments and said public equities currently serve as a temporary "parking place" for capital while the board funds private commitments.
On performance, CapTrust reported the plan produced a 9.7% return through Sept. 30 and noted a strong five-year annualized figure that is used by the actuary in valuation work. "Thus far, through the first 9 months of the year, the plan has generated a 9.7% return," Bridal reported. The consultants also showed that equity markets have been unusually concentrated in a handful of high-performing technology names this year and warned that such concentration can raise short-term risk even if long-term fundamentals remain constructive.
Commissioners asked pointed questions about core real estate, local bond investments and the plan's tolerance for volatility. CapTrust said core real estate provides both yield and inflation hedge characteristics but that the plan's size (CapTrust described the fund as "nearly 500,000,000 in assets") makes targeted local bond allocations difficult; managers do, however, provide some incidental local exposure. Commissioners also asked how long the plan could withstand sustained market weakness; CapTrust explained that equities are forward-looking and losses can materialize quickly when recession risk is priced into markets, citing 2022 as a recent example.
CapTrust and staff credited recent increases in county contributions with improving net cash flow metrics: staff reported that net cash outflows have narrowed compared with prior years and that the plan has realized roughly $270,000,000 in investment earnings over the past decade. CapTrust said the combination of disciplined allocation, ongoing contributions and selective use of private markets is intended to preserve benefits while pursuing the 7.25% actuarial objective.
The board's discussion closed with an emphasis on continuing to monitor market concentration and liquidity needs for private investments; no formal action was taken during the presentation, which served as an informational update to guide future decisions.
