Employee Matters
This column is prepared by staff from the Office of Human Resources. E-mail questions to benefits@ohr.wisc.edu or call 262-5650. For more information, visit http://www.bussvc.wisc.edu/ecbs/ecbs.html.
State of Wisconsin Investment Board (part 2 of 3)
How are investment decisions made?
The law requires that SWIB’s investment decisions be guided solely by the best interest of the Wisconsin Retirement System (WRS). Day-to-day decisions on what to buy and sell are made by SWIB’s professional investment staff or by external managers.
Investment decisions are based on guidelines set by trustees who oversee SWIB. Guidelines and strategies are reviewed annually with the help of investment staff and outside experts. Investment decisions take into account the needs of the WRS to help remain strong and viable now and in the future. We evaluate rate of return and risk in managing investments.
How are assets allocated in the WRS?
Asset allocation is an important part of the investment process. Assets are mixed across a wide variety of markets and diverse investments within each market. Traditional investments in domestic stocks and public bonds anchor the funds. Additional return is pursued through international and emerging markets, direct loans, real estate and private equity. Studies have shown that how the assets are allocated accounts for 80–90 percent of the ultimate performance of the funds. Selections of individual investments within each asset class account for the rest. Targets are based on expected returns and risk levels for asset classes and the cash flow needs of the WRS.
2007 Core Fund targets:
- Domestic stocks: 36 percent
- International stocks: 22 percent
- Fixed income: 30 percent
- Real estate: 5 percent
- Private debt and equity: 5 percent
- Multi-asset: 2 percent
2007 Variable Fund targets:
- Domestic stocks: 79 percent
- International stocks: 20 percent
- Multi-asset: 1 percent
What are SWIB’s policies regarding socially responsible investing?
SWIB’s responsibility is to make investment decisions in the best interest of the trust funds it manages. Although SWIB cannot make investments based on social or political objectives, it does consider the economic effects of social and humanitarian issues during investment analysis. An example of an important social issue in the news is the genocide occurring in the Darfur region of Sudan, Africa. SWIB does not have investments directly in Sudan, but we do have investments in a few companies with some business operations in Sudan. A bill has been introduced in the Wisconsin Legislature requiring SWIB to divest more than $100 million from those companies. While we find the events in Sudan appalling, we do not support legislation requiring divestment from any country or company because it infringes on SWIB’s legal responsibility.
In addition, previous court cases have ruled that members of the WRS have property rights to the fund and attempts to use trust funds for other purposes were found to be unconstitutional.
SWIB regularly engages companies if there are concerns about their activities. If SWIB is unable to resolve these concerns, selling the investment in a time and manner that best protects the interests of the trust funds is an option. Divestment removes that opportunity.