Managing an investment fund to support hundreds of thousands of Oregon public employees in retirement today and decades from now, requires looking far beyond the markets of today.
To support this important work, every three to five years the Oregon Investment Council (OIC) conducts a comprehensive asset-liability study to evaluate how the Oregon Public Employees Retirement Fund (OPERF) should be invested. A collaborative effort between OIC, Treasury investment staff, and OIC consultants, the study examines the relationship between the fund’s investments, expected market conditions, forecasted system pension obligations, and the acceptable level of investment risk within the fund that the OIC is comfortable taking on in order to fulfill its investment objectives.
The asset-liability study is one of OIC’s most important responsibilities. Taking place over a multi-year period during public OIC meetings, its findings help shape the allocation of assets across the fund’s primary portfolios: public and private equities, fixed income, real estate, real assets, diversifying strategies.
OPERF’s New Asset Allocation
Taking into account extensive expert input, the OIC voted to distribute risk more evenly across the portfolio while increasing the fund’s projected future earnings compared to the previous allocation targets. Aligning with OPERF’s strategic investment objectives, the adopted allocations will support the portfolio’s ability to pursue stable, risk-adjusted returns in years when markets are performing well while preserving capital during periods of market stress. The new allocations also establish Credit as a standalone asset portfolio, shifting investments from the existing Fixed Income and Opportunity portfolios to provide greater flexibility in managing credit exposures and capturing opportunities across credit markets. The newly adopted policy allocation targets include:
- Public Equity: 26%
- Fixed Income: 20%
- Private Equity: 19%
- Real Estate: 10%
- Real Assets: 10%
- Diversifying Strategies: 7.5%
- Credit: 7.5%
Capital Market Assumptions
The OIC began the asset-liability study by reviewing capital market assumptions prepared by investment consultant Meketa. These assumptions analyze how different types of investments and investment portfolios may perform over longer timeframes, such as 10, 20, and 30 years. Methods used for the assumptions are in-line with industry standards and represent a mixture of three mechanisms; historical average returns, financial theories (higher risk = higher return), and current company valuations relative to historical values.
The OIC voted to adopt an average of the expected returns and risks for each of OPERF’s portfolios (right) as forecasted by Meketa, investment consultant Aon, and Treasury investment staff.
Meketa uses these forecasted portfolio figures to conduct long-term risk/return analysis to develop expected return and volatility models for the OPERF portfolio’s current policy target allocations, OPERF’s actual allocations (as of 3/31/2025), and a reference portfolio of 62.5% stocks and 37.5% bonds. They also run positive and negative market scenarios to learn how each portfolio model would respond to a variety of environments.
Results: The exercise determined that OPERF’s current policy target allocations and actual allocations (as of 3/31/2025) are positioned to achieve the long-term objectives of the fund, which is to deliver returns greater than the system’s 6.9% assumed rate of return. Watch the below clip to hear the OIC’s discussion with investment consultants during their review of the expected risks and returns:
Connecting Investments and Pension Obligations
In May 2025, the OIC held a joint meeting with the PERS Board to examine the retirement system’s underlying actuarial information. The discussion helped connect OPERF’s investment strategy with the system’s current and long-term obligations to the fund’s beneficiaries, retirees, and active public employee members.
Key takeaways: Understanding a wholistic point of view of the Oregon public employee’s pension system is essential to the asset-liability study. Investment decisions cannot be evaluated solely on potential returns; they must also be considered in the context of when and how the retirement system expects to need those funds. Watch the below clip to hear the Council’s conversation with PERS’s actuary and the impacts of recent investment returns:
Click here to view the presentation slides from this agenda item at the May 28, 2025, OIC meeting.
Understanding Risk
Investment strategy is ultimately about balancing desired rates of return and risk. In October 2025, OIC members and Treasury staff participated in a risk survey designed to help identify and discuss the OIC’s perspectives on investment risk as part of the asset-liability process.
The survey provided another important input into the study: how much risk the fund should be willing to take in pursuit of its long-term objectives. Combining those perspectives with previously conducted analysis helped ensure potential asset-allocation strategies were evaluated not only for their expected returns, but also for the risks they present.
Key takeaways: Responses to the risk survey indicated a high level of consensus between the OIC and Treasury investment staff regarding risk levels, maintaining progress around increasing the system’s funded ratio, and avoiding major drawdowns and events that would cause a negative net cash flow within OPERF. Watch the below video as investment consultants share primary takeaways from the risk survey results with OIC members:
Click here to view the results of the risk survey.
Modeling Thousands of Possible Market Environments
With the assumptions, actuarial information and risk considerations established, consultants modeled how different portfolios could perform under a wide range of possible future market environments and the impact it would have on the state’s pension system and funded status. The analysis included thousands of potential scenarios, allowing the OIC and Treasury investment staff to examine outcomes across many different combinations of market returns, volatility, and other factors.
Rather than attempting to predict exactly what the future will look like, this type of analysis helps answer a broader question: how resilient is a potential investment strategy across many different futures? The results helped Treasury staff and consultants compare potential asset allocation mixes and understand their potential effects on investment returns, risk, liquidity, and the ability of the retirement fund to meet its long-term obligations.
Results: Beyond identifying the portfolio with the highest projected return, the analysis helped identify an asset mix that appropriately balances long-term returns potential with the level of risk within OPERF that the OIC is comfortable with. OPERF’s current asset allocation mix, listed in the below video as “actual”, reflects the fund’s asset allocations as of (4/30/2026) and produced the highest expected return in the model and contained the highest volatility. Additional portfolio options produced varying levels of forecasted return and volatility rates. Watch the below discussion between consultants and the OIC regarding the results of the simulations:
A New Long-Term Investment
The multi-year asset-liability study culminated in the OIC’s adoption of new strategic asset-allocation targets and ranges for OPERF at their September 2, 2026, meeting. These targets provide the long-term framework for how Treasury manages the pension fund’s investments, while the ranges provide flexibility to respond to changing market conditions and manage the portfolio over time.
The adopted allocation reflects the OIC’s consideration of the asset-liability study’s extensive analysis, including capital-market expectations, the retirement system’s liabilities, risk considerations, and thousands of potential market scenarios. Together, these decisions establish the investment framework designed to position OPERF to meet its long-term obligations while prudently managing investment risk.
The adopted allocation reflects the OIC’s consideration of the asset-liability study’s extensive analysis, including capital-market expectations, the retirement system’s liabilities, risk considerations, and thousands of potential market scenarios. Together, these decisions establish the investment framework designed to position OPERF to meet its long-term obligations while prudently managing investment risk.