Combined Investment FundsTo realize the asset allocations set forth in the Connecticut Retirement Plans and Trust Funds’ (CRPTF) Investment Policy Statement, the Treasurer administers Combined Investment Funds (“CIF”) as a series of mutual funds in which the CRPTF may invest through the purchase of ownership interests. The asset mix for the CRPTF is established by the Treasurer, with approval of the independent Investment Advisory Council (IAC), based on (1) capital market theory, (2) financial and fiduciary requirements, and (3) liquidity needs. A broad array of asset classes is considered for inclusion in a potential asset allocation structure. Each asset class has its own distinct characteristics, as well as expectations for long-term return and risk behavior.
The Connecticut Retirement Plans and Trust Funds has active Combined Investment Funds. You will find descriptions of each Fund below.
The Global Equity CIF ("GE") will invest primarily in equity instruments to meet the CRPTF asset allocation guidelines for asset classes having the characteristics and categories of equities. In the overall asset allocation, GE’s goal is to primarily achieve capital appreciation and, secondarily, achieve a long-term, real rate of return significantly above the inflation rate. The inclusion of global equities can provide favorable risk-adjusted returns to a portfolio utilizing both active or passive strategies.
The Domestic Equity CIF (“DE”) will invest primarily in the common stocks of U.S. corporations. These investments will be primarily made using money managers. DE's assets will be allocated across the U.S. stock market so that there is diversification by both market capitalization and investment style, such as value and growth.
The Developed Markets CIF (“DM”) will invest primarily in the common stocks of non-U.S. corporations. These investments will be primarily made using money managers. DM assets will be allocated across foreign markets such that there is diversification by market, capitalization and style which, in aggregate, are structured to replicate the characteristics of the comparable developed non-U.S. equity markets. Non-U.S. equities are defined as common stocks issued by companies domiciled outside the U.S. Developed Markets are defined as the countries with well-developed economies and capital markets. They tend to be high per capita income with efficient market institutions.
The Emerging Markets CIF (“EM”) will invest primarily in the common stocks of non-U.S. corporations. These investments will primarily be made using money managers. EM assets will be allocated across emerging markets such that there is diversification by market, capitalization and style which, in aggregate, are structured to replicate the characteristics of the comparable emerging markets equity index. Non-U.S. equities are defined as common stocks issued by companies domiciled outside the U.S. Emerging Markets are defined as the countries with developing economies and capital markets. They tend to be lower per capita income with less efficient market institutions.
Core Fixed Income
The Core Fixed Income CIF (CFI”) will invest primarily in fixed-income securities in the domestic U.S. markets. In the overall asset allocation, CFI’s goal is primarily to preserve capital and secondarily to provide current income to the CRPTF. The inclusion of fixed income will provide a source of diversification to other asset classes within the CRPTF. The CFI portfolio consists of active and passive managed fixed income mandates. The CFI may invest in debt instruments issued by the U.S. Government and its agencies, inflation protected securities, “quasi-Government” agencies, municipalities and U.S. corporations. In addition, mortgage and asset-back securities, Euro bonds, high quality quasi or sovereign debt and any other public or private U.S. regulated debt securities are permitted.
Non-Core Fixed Income
The Non-Core Fixed Income CIF (“Public Credit CIF” or “PCC”) is comprised of those assets and asset classes outside the scope of the CFI which may include, but are not limited to, high yield securities, convertible securities, and emerging market securities. PCC assets are expected to generate higher returns and greater income than CFI assets with a secondary objective of capital preservation.
The Private Equity CIF (“PE”) will invest in various private equity strategies and vehicles. The purpose of the PE is to earn returns in excess of the public equity markets and generate attractive risk-adjusted rates of return through investments with managers executing active strategies to increase the strategic and financial value of private companies. The PE investments will generally be made in externally managed limited partnerships or through separate accounts that focus on private equity investments. The PE may also make co-investments. In addition, the PE may acquire and divest fund interests through secondary or other transactions.
Private equity includes both Venture Capital and Corporate Finance investment strategies. Venture Capital typically involves equity capital invested in young or development stage companies, whether start-up, early, mid or late-stage companies. Corporate Finance typically involves equity and debt capital invested in growth, mature or distressed stage companies, often through the financing of acquisitions, spin-offs, mergers or changes in capitalization.
Private Credit (“PVC”) will predominately invest in direct and indirect debt investments. The purpose of the PVC is to generate attractive, risk-adjusted returns in excess of public debt strategies, with the expected benefit of decreased volatility of the CRPTF’s overall portfolio through lower correlations with other asset classes. The PVC will invest in credit-related strategies not available through other pooled investment funds and may include direct lending, mezzanine, distressed debt, and special situations funds and co-investments with these funds. The PVC investments will generally be made in externally managed limited partnerships or through separate accounts that focus on private debt investments. The PVC may also make co-investments.
The Absolute Return CIF (“AR”) will invest CRPTF assets in investment strategies that offer the potential to reduce risk, enhance overall portfolio expected returns, or a combination of both in a variety of market conditions. The AR serves as a vehicle for strategies that provide diversification benefits and are not easily classified, categorized, or described in the other CIFs. Hybrid strategies that cut across multiple asset classes will also be considered part of the opportunity set.
AR strategies represent a broad set of investment styles, mandates and products that focus primarily on the liquid equity, fixed income and derivatives markets, and illiquid securities and investments. AR strategies may target absolute returns without reference to a traditional benchmark since managers may use a wide range of investment tools such as short-selling, leverage, derivatives and complex securities to achieve their investment objectives.
The AR may invest in strategies that do not fit the constraints of existing CIFs and other strategies including absolute return strategies and other alternative asset strategies. The AR mandate may be executed through investment managers who actively manage a fund of funds (“FoF”) portfolio or through direct investments in separately managed accounts (“SMA”).
Real estate, infrastructure and natural resources are all real assets, which are long-lived physical assets that derive their value from claims on current and future cash flows. The Real Estate (“RE”) asset class strategic objectives are to provide diversification to the overall CRPTF investment program, preserve investment capital and generate attractive risk-adjusted rates of return. In addition to providing current income and the potential for capital appreciation, real estate assets provide at least two primary benefits to a diversified plan. First, real estate assets have low correlation to equities and fixed income markets and should thereby provide diversification benefits to the CRPTF. Second, real estate is also designed to yield an inflation-adjusted or positive “real” return.
Investments within the real estate asset class include the development or acquisition and management of properties to generate income and with the potential for capital appreciation through strong operations, releasing, and/or repositioning, as needed.
The investments may consist of a number of different investment strategies through varying investment vehicles , primarily with active managers, including externally managed commingled funds, separate accounts, publicly traded real estate investment trusts (“REIT”), limited liability companies, limited partnerships, direct investments, co-investments and master limited partnerships (“MLPs”).
Infrastructure and Natural Resources
The Infrastructure and Natural Resources CIF’s (“INR”) strategic objectives are to provide diversification to the overall CRPTF investment program, preserve investment capital and generate attractive risk-adjusted rates of return. Similar to real estate, investments in Infrastructure provide current income and the potential for capital appreciation., INR assets have low correlation to equities and fixed income markets and also have revenue streams that are tied to inflation and therefore typically yield an inflation-adjusted or positive “real” return.
Infrastructure investments include the building or acquisition of assets that generate a long stream of cash flows that increase over time and are less sensitive to price fluctuations in markets generally. In the case of natural resources, investments include the acquisition of land or physical assets to extract, grow, collect, distribute, process, and/or refine raw materials to generate income and for the realization of their economic value.
The investments may consist of a number of different investment strategies, through varying investment vehicles, primarily with active managers, including externally managed commingled funds, separate accounts, publicly traded infrastructure companies, limited liability companies, limited partnerships, direct investments, co-investments and master limited partnerships (“MLPs”).
Liquidity (Cash Equivalents)
The Liquidity Fund consists of short-term U.S. assets that include cash and cash equivalents that are routinely used to make benefits payments and meet other cash needs. The Liquidity Fund assets will be managed consistent with U.S. money market guidelines.
For additional information about the investment policy of the Connecticut Retirement Plans and Trust Funds please consult the Investment Policy Statement.