Asset allocation refers to process by which the Fund is allocated among various types of investments that have in common certain fundamental and risk-based characteristics. The Board, in conjunction with advice from Staff and the Investment Consultant, is responsible for establishing and reviewing the Strategic Asset Allocation (SAA) process for the Fund. This oversight includes the selection of well-aligned strategic advisors, the use of a diverse range of forecasting approaches, the determination of appropriate risk budgets, and appropriate levels of delegated authority.

Asset/Liability studies provide the primary basis for changes to the target allocations of the SAA and are conducted at least every five years. Relevant policies are amended when a proposed investment strategy is adopted. The Board may review its target allocations more frequently if necessary due to material changes in either the liability structure of the plan or the capital markets.

Based on its determination of the appropriate risk tolerance of the Fund and its long term return expectations, the Board in consultation with the Staff and Investment Consultant establishes the following SAA parameters as percentages of the Fund’s asset classes and sub-asset classes:

• Strategic Target Allocations that represent neutral weights to asset classes and sub-asset classes selected to play a distinct and purposeful a distinct and purposeful role within the Fund.
• Tactical Rebalancing Ranges allow for routine fluctuations in market values of portfolio investments and establish parameters for management of the Fund’s risk exposures by Staff.
• Strategic Rebalancing Ranges establish the outer bounds for the allocation of the Fund and to allow for flexibility during times of market stress or dislocation.

Rebalancing activities ensure that the long-term investment objectives of the System are achieved by allowing Investment Staff the flexibility to adjust for market movements and to incorporate current market conditions into the asset allocation. The Board has chosen to adopt a rebalancing policy that allows Investment Staff to rebalance the portfolio between major asset classes as well as within the sub-asset classes, a framework that is governed by the Board approved ranges rather than fixed time periods.