The Lexington Police & Fire Pension Board is considering significant changes to its investment strategy, aiming to enhance portfolio performance and stability. During the recent meeting, board members discussed the current structure, which includes three active managers: Acadian, Bailey Gifford, and Capital Group. Concerns were raised about the disappointing performance of Bailey Gifford and Capital Group, both of which have a growth bias that has not fared well in the current market climate, where value stocks have outperformed growth stocks over the past year.

The board is exploring two alternative strategies to address these issues. The first option involves replacing both Bailey Gifford and Capital Group with managers that have a more balanced approach, focusing less on growth. The second option suggests maintaining Acadian as the core manager while complementing it with both a value manager and a growth manager to create a more diversified portfolio.

Key discussions highlighted the importance of active management in non-U.S. equity markets, where less efficient markets can benefit from strategic investment decisions. The board emphasized the need to streamline the portfolio and potentially broaden the discretion of international equity managers to better allocate resources between developed and emerging markets.

The proposed changes aim to reduce the current growth bias and improve overall tracking error, which currently stands at 3.3%. By adjusting the investment strategy, the board hopes to outperform benchmarks and achieve a more stable long-term path for the pension fund. The outcome of these discussions could significantly impact the financial health of the pension fund, ensuring better returns for its members in the future.