LEXINGTON, Ky. — The Lexington Police and Fire Retirement Fund Board voted Wednesday to modestly shift its $1 billion portfolio toward safer holdings, approving an investment strategy with more U.S. bonds and a tilt toward domestic stocks.
On a motion that passed with one dissent, the board adopted “Mix 2 with U.S. bias,” one of several scenarios presented in an asset-liability study by Callan LLC. The change will trim international equity exposure and boost investment-grade fixed income by about five percentage points.
Board members said the move aims to guard against market downturns while keeping projected returns above the plan’s 7 percent actuarial target.
“It’s just time for a little bit of a tweak,” member Tommy Puckett said. “I’d rather tweak for safety. The returns are going to be minimal change, unless all of a sudden international goes booming — which I just don’t see in my crystal ball.”
Consultant John Perrone of Callan told the board the fund is about 73 percent funded and, under current projections, would rise to 90 percent funded over the next decade. Higher bond yields since the last study in 2021, he said, make fixed income more attractive as a risk mitigator.
“You’re getting paid a lot more for fixed income,” Perrone said. “It only makes sense … that we don’t get too risky. We’re here for the long haul.”
The investment subcommittee did not take a formal vote in advance but leaned toward Mix 2 with a U.S. bias, members said. “We’re tired of … taking a bath in some of that other international,” said subcommittee chair Trey Abel, noting the domestic tilt reflects the board’s historic “home bias.”
The meeting also turned to an overhaul of the international equity portfolio. Citing persistent underperformance from two managers, Callan recommended replacing Bailey Gifford and Capital Guardian with one growth and one value manager to complement current core manager Acadian, which has outperformed benchmarks.
While members agreed to pursue “Alternative 2,” which would give managers discretion over emerging-market exposure, they amended the motion to have the subcommittee finalize manager selections and reconsider final allocations before returning to the full board for a vote.
The board also approved routine business, including retirements, disability benefits and widow’s annuities, and heard tributes to four recently deceased retirees from the police and fire divisions.
