Oregon Pension Tweaks Portfolio, Moves $2 Billion Into Lower-Risk Investments After Supreme Court Decision

Following a state Supreme Court decision last month that restored COLAs for many Oregon retirees, the state’s investment council has shifted some pension assets from private equity into lower-risk securities.

In all, the pension’s allocation to private equity is expected to drop from 20 percent to 17.5 percent.

More details from the Capitol Bureau:

The Oregon Investment Council moved Wednesday toward shifting a small share of Oregon’s public-pension investments from higher-yielding private equities into public securities.

The move is projected to generate up to $3 billion less over 20 years for the Public Employees Retirement Fund, whose earnings account for 73 cents of every dollar paid out in pension benefits.

But by moving into securities, it also will allow for a better cash flow for the system to meet increased payments resulting from an April 30 decision of the Oregon Supreme Court. The court ruled that cost-of-living increases for public retirees cannot be reduced retroactively on benefits earned before May 2013.

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The shift by the council, which oversees around $90 billion in total state investments, will reduce the state’s share of private equity as a total of the PERS Fund from 20 to 17.5 percent – and increase the share of “diversifying assets” from 2.5 to 5 percent. The return rate on the first category is projected at 10.25 percent; on “diversifying assets,” the projected rate is 6.4 percent.

The actual amount of money involved in the shift is just under $2 billion.

The Supreme Court decision eroded the pension’s funding ratio, from 98 percent to 92 percent.

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