Trustees approve adviser’s rebalancing plan; private-credit liquidity flagged

TJ Lowe, the pension plans’ investment adviser, briefed trustees May 28 on market conditions, manager performance and recommended portfolio adjustments to bring allocations back toward policy targets and ensure sufficient cash for upcoming benefit distributions.

Lowe said markets had been volatile in recent months because of geopolitical developments and shifts in market leadership, but that strong recent returns meant it was appropriate to take some short-term risk off the table. He explained manager-level performance differences — especially in small and mid-cap growth managers — and flagged private-credit sector headlines tied to gated redemptions at large managers. "This is taking a little bit of risk off the table and getting us back to our long-term targets," Lowe said when describing the recommended reallocations.

Key recommendations included trimming certain large-cap equity exposures and raising fixed-income and cash positions to ensure the general plan can meet a roughly $1.5 million upcoming distribution without forced sales. For the police plan Lowe recommended a more modest raise to fixed income and a reweight of small/mid-cap allocations. Trustees asked for and received detail on dollar amounts by manager and on the mechanics and timing of the trades; Lowe said the trades could settle within one to two business days after orders were placed.

Trustees also discussed private-credit exposures. Lowe described how a recent market episode involving a large private-credit manager prompted gating and redemption requests industry-wide but said the board’s 2% tactical exposure was conservative and structured to limit leverage and liquidity mismatch. He noted that the managers the boards had selected were intended to provide diversification and a yield pickup versus traditional fixed income, but committed to monitor liquidity and valuation closely.

Both trustee panels moved and seconded the adviser’s recommended reallocations and voted to implement the trades. Staff will execute the rebalances, provide updated asset values in the next packet, and report on any manager searches if underperformance in the small/mid growth sleeve persists.