The Florida State Board of Administration (SBA) is moving to combine portions of its defined benefit and defined contribution assets under a new group trust structure, a step that could eventually lead to the co-management of assets across the two plans.
According to materials presented at a recent Board of Trustees meeting, the proposed structure would allow the Florida Retirement System Investment Plan to leverage the expertise of the pension fund’s investment staff while benefiting from the scale and resources of the DB plan.
Initially, the structure will be funded with DC assets from the Florida Retirement System Investment Plan’s Retirement Date Funds. The new Active Fixed Income Subtrust will manage the fixed income assets that currently comprise Aon’s Income Portfolio, including the FRS Enhanced U.S. Bond Index Fund, co-managed by BlackRock and Prudential; Prudential Core Plus; Allspring Core Fixed Income; and the FIAM Intermediate Duration Pool. The assets totaled approximately $1.75bn as of Dec. 31, 2025.
Under the proposal, the Group Trust would be overseen by SBA trustees, with management delegated to the executive director, the office of the chief investment officer and SBA staff. Individual subtrusts would hold assets and be managed by the relevant asset-class teams, while the Group Trust would serve as the legal entity for shared custody and trading agreements.
At first, the SBA’s DB fixed income team will manage the subtrust assets separately from the pension fund’s fixed income portfolio. Over time, the organization intends to merge the DB assets into the subtrust, creating a single unitized pool managed by the same internal investment team and supported by a roster of external managers.
SBA staff said the structure could eventually be expanded to include additional core fixed income strategies. While the targeted assets have different cash-flow frequencies, staff noted that overall inflows and outflows are expected to be similar to existing Retirement Date Fund assets and manageable under current operational processes.
The SBA also said the internal fixed income team and external managers supporting the portfolio are expected to add staff as needed to manage the increased assets and workload, while relying largely on existing systems and processes.
The changes are expected to have little visible impact on Florida Retirement System Investment Plan participants. Investors will not be required to make any elections or changes to their accounts, said the materials, and asset-allocation decisions will continue to be determined through the annual glidepath review conducted by Aon and the DC team.
DC plan participants are expected to see lower fees on the fixed income portion of the Retirement Date Funds as a result of SBA’s internal management and economies of scale.
Fund materials will be updated to reflect SBA’s role as manager of the fixed income assets, replacing the current external-manager structure. Over time, information related to portfolio holdings, risk characteristics, performance and fund overviews will evolve as the subtrust’s investments replace those of the existing fixed income managers.
The Active Fixed Income Subtrust, along with any future subtrusts, will also participate in the SBA’s securities lending program.
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