The board of the Ohio Police & Fire Pension Fund (OP&F) voted Wednesday to approve a recommendation that up to 40 percent of the $14.8 billion pension’s 5 percent real assets allocation be devoted to agriculture, according to a representative.
The decision was based on the Real Asset Investment Policy presented to the Board at its January meeting with Townsend, its real estate and real assets consultant, which recommended that the OP&F add both agriculture and infrastructure to its real assets allocation.
“Broadening the timber space to include infrastructure and agriculture should allow for more diversification, better risk-adjusted returns and an improved ability to implement the mandate,” OP&F subsequently wrote in its March monthly investment update.
OP&F Communications Manager David Graham told Agri Investor that the changes also stemmed challenges in fulfilling the 5 percent timber allocation which the pension had adopted in 2014. “We could not find enough suitable investments in timber to realize that five percent,” he said.
Going forward, in addition to 0-40 percent devoted to agriculture, 40-70 percent of the allocation will be devoted to infrastructure and 20-50 percent will remain devoted to timber. OP&F will not issue requests for proposals for the real assets portfolio, instead relying on Townsend to evaluate and bring opportunities to the board, Graham said.
As of the end of February, OP&F’s timber investments constituted 2 percent of its overall portfolio and had a market value of $297 million spread across five funds: Forest Investment Associates I, Hancock Timber Resources Group, Global Forest Partners G10 Fund, Brookfield Timberland Fund V and Brookfield Brazilian Timberland Fund II.
The inability of OP&F to meet its five percent allocation with suitable timber funds echoes comments made last year by Cambridge Retirement Board investment advisor Segal Macro Advisors, which expanded its search for timber funds to those that include a farmland component.