SWIB Plans for Future of Bond Portfolio

As the State of Wisconsin Investment Board (SWIB) continues a push toward risk aversion, its staff laid out new goals for the fixed-income portfolio that would look to find additional alpha minus any apparent investment hazard.

At an Aug. 4 meeting, Dominic Garcia, SWIB’s fixed-income fund of funds manager, presented a report, “Fixed-Income Strategy & Themes”, which highlighted some of the Board’s tactical plans for the bond space.

Vicki Hearing, SWIB public information officer, said yesterday that SWIB, which manages roughly $78 billion in assets for the Wisconsin Retirement System (WRS), the State Investment Fund (SIF) and other state trust funds, discussed its intentions for the asset class.

According to Garcia, the Madison-based Board would look to incorporate better use of active risk by establishing internal active portfolios as “core”, focusing more so on high conviction strategies, as well as eliminating active quant strategies.

Furthermore, he said that SWIB would look for a new investment opportunity in bank loans, long/short credit and hedge funds.

Previously, in looking back to the start of the year, the Board made extreme changes to its Core Trust Fund’s asset allocation strategy to return to leverage and curb risk.

Modifications included lowering total equities by 2% to 53%, increasing Treasury Inflation-Protected Securities (TIPS) from 3% to 7%, and bumping up multi-asset options by 2% to 6%, a SWIB 2010 asset allocation study said at the time.

Also, in February, SWIB revealed that it would create a new TIPS asset class. Hearing said previously that the additional bond class was “part of the overall strategy in leveraging the fund.”