The Arizona State Retirement System (ASRS) provides retirement, health insurance, and long-term disability benefits to employees of the state of Arizona, counties, municipalities, school districts, and other public entities. With approximately $50 billion in assets under management as of mid-2024, ASRS serves over 600,000 active members, retirees, and beneficiaries.
Investment Strategy
ASRS maintains a diversified investment portfolio designed to generate returns that meet the system’s long-term actuarial return assumptions. The asset allocation spans domestic and international equities, fixed income, real estate, private equity, and other alternatives. The ASRS board sets strategic allocation targets based on asset-liability studies and input from investment consultants and staff.
Public equities form the largest component of the portfolio, with broad exposure to U.S. and international markets. Fixed income provides stability, income, and portfolio protection during periods of market stress. The system has developed its alternatives program methodically, adding private markets exposure to enhance long-term returns and diversify risk.
Private Markets Approach
ASRS’s private markets program includes allocations to private equity, real estate, and private credit. The private equity portfolio spans buyout, growth equity, and credit strategies, with the system seeking diversification across fund sizes, geographies, and vintage years. ASRS has built relationships with established general partners and maintains a structured approach to portfolio construction.
Real estate represents a meaningful alternative allocation, with investments in core, value-add, and opportunistic strategies across property types. The system invests through commingled funds managed by experienced real estate operators.
Private credit has been an area of growing interest, with ASRS committing to strategies that offer attractive risk-adjusted yields and portfolio diversification. Direct lending and specialty finance funds complement the broader alternatives portfolio.
The ASRS investment team conducts comprehensive due diligence on prospective managers, examining performance attribution, team stability, investment process, risk management, and operational capabilities. The system emphasizes net-of-fee returns and alignment of interests when evaluating partnerships. The ASRS board provides governance oversight, reviewing and approving staff recommendations for new commitments.
Frequently Asked Questions
What is the size of ASRS's private equity allocation?
ASRS targets approximately 10% of total assets in private equity, representing roughly $5 billion in committed capital. The program includes commitments to buyout, growth equity, and credit strategies with diversification across vintage years and geographies.
What commitment sizes does ASRS typically make?
ASRS makes commitments typically ranging from $50 million to $150 million per fund, depending on strategy and fund size. The system maintains relationships with established managers and selectively considers newer strategies that complement the existing portfolio.
How does ASRS evaluate and select managers?
ASRS employs an internal investment team that works with external consultants to identify and evaluate managers. The ASRS board provides oversight and approves new commitments. Managers should demonstrate strong track records, team stability, process discipline, and alignment of interests. Engaging through consultant networks is an effective approach.
