Florida now has 78% of its $135 billion in holdings in stocks, real estate and other investments. That percentage will be reduced during the next year to about 69%, according to a Palm Beach Post news report.
State Board of Administration Director Coleman Stipanovich conducted a workshop for Governor Charlie Crist, Attorney General Bill McCollum and Chief Financial Officer Alex Sink – Board of Administration members – to explain that in the event of a severe market downturn, the Florida Retirement System’s current portfolio would lose $5 billion more than the new asset mix. “The idea here is to protect our downside,” Stipanovich, told the state officials, according to the news report.
Stipanovich said his managers will also reduce the pension fund’s domestic stocks from 50% of the total to about 38%.
Sink, a former banker who was elected in November, said she wondered how the state could have gotten so heavily invested in stocks. “I’m thinking: 78% – whoops! That’s way out there on the risk scale,” Sink said.
Stipanovich said the current mix was a result of the board holding steady even when the stock market tanked between 2000 and 2003. “We didn’t panic,” he told the officials.
As stocks since then have appreciated dramatically, so has the proportionate share of stocks in the portfolio, which eventually made the current reallocation necessary, Stipanovich explained.