A Diversified Portfolio

How do you achieve your investment goals in volatile markets? Diversify. Our broadly diversified portfolio is designed to achieve our 8% long-term return goal with an acceptable level of risk.

Having many types of investments not only reduces our exposure to risk, but also allows us to take advantage of opportunities across a variety of asset classes and even within the classes themselves.

Watch: A Diversified Portfolio


It’s great that we’ve met our investment goal in the past, but we spend most of our time thinking about the future. Every year, our board of trustees reviews and updates our capital market assumptions. Those assumptions, which are created with guidance from outside investment advisors, are forward-looking expectations of the return, risk and correlation of each of our asset classes. We then model thousands of potential asset class combinations to help our trustees and investment staff create a portfolio that will ultimately meet our long-term expected return goal with an acceptable level of risk.

TCDRS Capital Market Assumptions
As of Jan. 1, 2019

Asset Category (Portfolio) Expected Return Expected Risk*
U.S. Equities 7.10% 17.00%
International Equities — Developed 7.10% 18.00%
International Equities — Emerging 7.60% 26.00%
Global Equities 7.40% 17.70%
Hedge Funds 5.60% 4.45%
Strategic Credit 6.09% 5.86%
Distressed Debt 8.90% 11.00%
Direct Lending 9.65% 12.00%
Private Equity 10.10% 20.00%
REITs 5.85% 22.00%
Commodities 4.25% 18.00%
Master Limited Partnerships 7.05% 17.00%
Private Real Estate Partnerships 8.00% 30.00%
TIPS 2.70% 7.00%
Investment-Grade Bonds 3.30% 4.00%
Cash and Cash Equivalents  2.30% 2.00%
* Measured as one standard deviation.
See the correlation table from the TCDRS Investment Policy. 

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