State Investment Portfolios Increasing Focus on Alternatives

State investment portfolios are seeing an uptick in alternative investments with less focus on fixed income.

This trend was highlighted by five public fund chief investment officers during a panel at the Dec. 4 National Association of State Treasurers (NAST) conference in New York City. The panel called "Trends in Asset Allocation" focused heavily on how alternative investments such as real estate, private equity and hedge funds have been effective with portfolios increasing yields while also combatting the risk of expected higher interest rates in the near future.

Anwit Bahuguna, senior portfolio manager at Columbia Management, explained that the 2008 financial crisis was a lesson for investors on how diversification does not always protect against losses.

"Two thousand and eight and 2009 happened and people lost a ton of their assets and diversification didn't help at all," said Bahuguna during the panel at the NAST Issues Conference on Public Funds Management that was moderated by Washington State Treasurer James L. McIntire. "In that 2008 and 2009 period, emerging market equities, high-yield, all these other so called standard capital market diversifiers did even more poorly than simply having a few blue chip stocks would have done."

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