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Board approves private-markets pacing plan and creates multisector bond allocation
Summary
The board approved the fiscal year 2026–27 private markets pacing plan and voted to reclassify three bond subcategories into a new multisector bond allocation to give staff tactical flexibility while preserving oversight.
The Board of Administration approved the fiscal year 2026–27 private markets pacing plan and authorized a classification change to create a new multisector bond allocation at its May 26 meeting in San Jose.
The pacing plan, presented by investment staff, models private-market commitments and projected capital calls to help the board reach its strategic asset-allocation targets over time. CIO Jaquan said the pension plan’s fiscal-year-to-date return estimates were ‘‘a healthy margin above the discount rate’’ and framed the pacing plan as a tool to manage irregular private-market cash flows.
Why it matters: private-market commitments are illiquid and subject to managers’ capital calls; the pacing plan sets a multi-year pathway for how many commitments the plan should make and when. Staff told trustees the office is modeling projections 10 years out and will revisit the plan annually because real-world calls and distributions often differ from modeled assumptions.
Key details: staff reported that across five private asset classes they committed about 6% more than the pacing plan in the current fiscal year; growth real estate has been undercommitted in recent years (staff reported roughly 55% of the pacing-plan target was funded in the most recent fiscal year). Staff also reported $16.8 million in fee savings in calendar year 2025, largely from co-investments.
On fixed income, staff and an outside capital-markets presenter described a proposed classification change to combine high-yield bonds, emerging-market debt and investment-grade bonds into a single multisector bonds category. The presenter said the change is a classification and governance move — not an immediate change in manager lineup — intended to allow tactical rotation across credit sectors while using a weighted composite benchmark.
Board action and oversight: a motion to approve the private-markets pacing plan was made by Trustee Santos and seconded; the chair called and recorded a voice vote in favor. A separate motion to adopt the multisector bond classification passed on a subsequent voice vote after trustees asked staff to return with implementation and monitoring details to the investment committee in August.
Trustee questions focused on governance and downside risk. Staff said the plan retains existing oversight mechanisms and that any future tactical shifts would be reviewed by the investment committee and brought to the board as appropriate.
What’s next: staff will implement the pacing plan assumptions, populate the multisector bond exposure as a composite of current benchmarks, and present detailed implementation and oversight proposals to the investment committee in August.
