The San Bernardino (Calif.)County Employees Retirement Association is looking to take advantage of opportunities across the capital market structure, including bank loans and convertibles. The $5 billion plan is also reviewing whether it should give its long-only domestic equity managers permission to take short positions and is eyeing 130/30 strategies, said Don Pierce, investment officer. San Bernardino will discuss these moves during a triennial asset/liability study, which it will start in December with New England Pension Consultants.
During the study, the fund will review the subsets within its asset allocation categories, such as which parts of the sub-investment grade market may be missing from its portfolio. The fund is talking to incumbent high-yield managers Seix Advisors and MacKay Shields to see if they could run this type of strategy. Bob Sherman, director of client service & marketing for Seix Advisors, and Rene Bustamante, MacKay's chief compliance officer, said their firms do not discuss clients.
Within domestic equity, nothing is sacrosanct about having a beta of one, Pierce continued. The plan already invests in a Mesirow Financial fund of funds of long/short and short-biased managers, but that doesn't sit within its domestic equity portfolio. The fund has a 32% target allocation to domestic equity.
Separately, San Bernardino is studying infrastructure investments. Several fund managers Pierce respects, such as RREEF, have recently launched infrastructure funds, so "we should at least take the time to find out what the buzz is all about," he noted. One of Pierce's concerns is whether government entities would have the predilection to take back a deal if they don't approve of the way fund managers are handling the assets. There is no timetable for a decision on whether to invest.