The target asset allocation and best estimates of arithmetic nominal rates of return for each major asset class are summarized in the following table:
| Asset Class | Target Allocation | Long-Term Nominal Rate of Return |
|---|---|---|
| Combined Equity | 42% | 5.40% |
| Combined Fixed Income | 20% | 1.50% |
| Real Return (Diversified Inflation Strategies) | 10% | 3.50% |
| Real Estate | 3% | 4.50% |
| Absolute Return (Diversified Hedge Funds) | 10% | 4.25% |
| Private Equity | 10% | 8.50% |
| Cash Equivalent | 5% | -0.25% |
| Total | 100% |
The discount rate used to measure the total pension liability was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at actuarially determined contribution rate of projected compensation over the remaining 28 year amortization period of the unfunded actuarial accrued liability. The actuarial determined contribution rate is adjusted to reflect the phase in of anticipated gains on actuarial value of assets over the first four years of the projection period.
Sensitivity of the University's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents the University's proportionate share of the net pension liability calculated using the discount rate of 7.50 percent, as well as what the University's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50 percent) or 1-percentage-point higher (8.50 percent) than the current rate:
| 1% Decrease (6.50%) | Discount Rate (7.50%) | 1% Increase (8.50%) | |
|---|---|---|---|
| University's share of the net pension liability | $33,125,900 | $29,408,264 | $26,263,200 |
Pension plan fiduciary net position. Detailed information about the pension plans' fiduciary net position is available in the separately issued KERS financial reports.