Consultants recommend 50% equity allocation for WA Cares Fund, citing higher long‑term returns

Makita Investment Group recommended that the WA Cares Fund move from a 0% equity allocation to a 50% equity / 50% fixed‑income allocation, saying that change raises long‑term expected returns while preserving fund objectives.

"Increase equity allocation from where it is now which is 0% equity to 50% equity, which leaves 50% to fixed income assets and no specific allocation to cash," consultant Jonathan Camp told the Investment Strategy Subcommittee. He said the recommendation reflects both quantitative modeling and qualitative judgment about risk tolerances.

Makita displayed a range of modeled allocations from 0% to 100% equity and described the trade‑off between higher expected returns and higher volatility. Under a 15‑year annualized approach Makita showed expected returns rising from about 4.9% (0% equity) to about 6.5% (100% equity); the 50/50 recommendation sits between those extremes. Camp told members the 50/50 allocation maintains a high probability of long‑term solvency in their base‑case scenarios.

Presenters stressed that the recommendation is not permanent; it would be revisited when more program experience accrues or sooner if market conditions change. Christie Bromley of the Washington State Investment Board told the subcommittee the recommendation will be forwarded to WSIB for action "after [this] meeting here in just, couple weeks."

The consultants flagged several caveats: limited benefit‑payment history for the new program, sensitivity to wage‑growth and inflation assumptions, and potential public scrutiny if short‑term market volatility produces losses while the fund holds a larger equity stake. The recommendation therefore pairs an expected return improvement with explicit caution about monitoring and potential future adjustments.