The Dallas Police and Fire Pension System is aiming to sell agriculture assets as part of an effort to bring its $287.4 million natural resources portfolio in line with a reduction in its target allocation from 10 percent to 5 percent.
At its May meeting, the pension’s board of trustees authorised Hancock Agricultural Investment Group to sell some assets after a comprehensive hold-and-sell portfolio review by the asset manager, meeting documents show.
“Hancock conducted a hold-sell analysis, on a property-by-property basis, with the goal of reducing the size of the portfolio by disposing of select properties to get closer to the asset allocation ranges provided in the Investment Policy Statement,” according to a May meeting agenda.
The natural resources portfolio is made up of timber and farmland assets, and represents just over 20 percent of the pension fund’s real assets allocation.
The new allocations are in line with a report prepared for the DPFPS board in March by investment advisory firm NEPC. The report recommended DPFPS reduce its exposure to real assets — including natural resources, real estate and infrastructure — as well as private equity and private debt, in favour of its global equity, emerging markets and fixed income allocations. The changes are meant to increase liquidity within the fund and insulate performance projections from stagflation or recession in the US economy.
“This change is primarily driven by considerations of our overall investment portfolio and does not reflect a negative view on the asset class itself,” DPFPS real assets investment manager Christina Wu told Agri Investor via email.
DPFPS representatives would not comment on how many properties Hancock will attempt to sell, or say whether the board will also look to sell off timber assets.
DPFPS had $162.3 million allocated to agriculture, $80.9 million to global timberland and $44.3 million to US timberland as of July, bringing the natural resources portfolio to 10.2 percent of the pension’s total $2.8 billion fund. It would need to sell $147 million in timber and agri assets to bring its natural resources allocation down to the 5 percent target set in March.
The global natural resources portfolio yielded 0.24 percent in the year ending June, compared with a -9.47 percent benchmark. Over the past three years, the portfolio returned 6.33 percent against a -3.54 percent benchmark.
“The natural resources portfolio saw strong performance from permanent crop and farmland investments, while returns for the timberland portfolio were negative due to the impact of foreign currency losses related to international timber investments,” according to pension documents.
Hancock Agricultural Investment Group manages DPFPS’s agricultural portfolio, while Forest Investment Associates manages its domestic timber portfolio and BTG Pactual Asset Management its global timber portfolio.