Our Investment Strategy
New asset allocation close to implementation

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    CCCERA’s primary function is to deliver timely and accurate pension benefits to Association members. Pension benefits represent the total of employer and member contributions, and market returns on the investment of those contributions over time. Pension fund trustees have a fiduciary responsibility to carefully invest plan assets to generate market returns while being mindful of the safety of the hard earned contributions. Pension funds typically accomplish that balance between investment returns and safety by allocating plan assets among several different types of investments, each with its own prospects for growth and safety.

    Most pension funds, including CCCERA, have historically attempted to strike the right balance by allocating plan investments into three broad areas:

    1. Bonds issued by governments and corporations, intended to provide income and reduce overall portfolio volatility
    2. Equities (stocks) intended to provide long-term growth
    3. Diversified alternative investments including real estate and private equity.

    In 2016, after considerable study and careful deliberation, the CCCERA Board of Trustees approved a significant change to CCCERA’s investment allocation. The new allocation has been dubbed a Functionally Focused Portfolio (FFP). It will be rolled out over approximately three years. The FFP is designed to allocate a higher percentage of assets into the short-term, highly liquid fixed income instruments that will be used to accomplish CCCERA’s primary function, paying for the next three to four years of pension benefits. CCCERA will continue to allocate the bulk of the remaining assets into a globally diversified growth sub-portfolio of stocks, real estate and alternative asset strategies and the remaining into risk diversified investments. CCCERA’s current allocations to each program can be found here:

    Asset Allocation Target and Ranges – Adopted June 27, 2018

    The Board believes that in addition to focusing more investable resources into short-term instruments intended to achieve the plan’s primary function of paying near-term pension benefits, the new Functionally Focused Portfolio allocation strategy will reduce the inherently higher volatility of the returns generated by our historical allocation. The Trustees recognize that by reducing the volatility of investment returns, some higher returns may not necessarily be achieved during the up markets. Conversely, CCCERA returns will be less likely to be as negatively impacted during the inevitable down years. The Board realizes that with this new strategy, CCCERA may not necessarily capture all the market highs, nor have to endure all the market lows either.

    The following chart provides a graphic representation of CCCERA’s new Functionally Focused Portfolio investment strategy:

    Portfolio Function Impact on Total Fund Performance

    Liquidity

    • Store and disburse benefit payments
    • Reduces total fund return in rising markets
       
    • Maintains value in flat and falling markets

    Growth

    • Grow assets for future benefit payments
    • Increases total fund returns in rising markets
       
    • Reduces total fund returns in falling markets

    Risk Diversifying

    • Assets that can provide a hedge against a broad market decline while not losing value in rising markets
    • Neutral impact on total fund returns

    Total Fund

     
    • The total fund is expected to rise less in rising markets, and fall less in falling markets

    Commands