In a recent meeting held on June 27, 2025, the St. Mary's County Retiree Benefit Trust (OPEB) discussed strategic adjustments to their investment allocations, focusing on the performance of various market segments. The meeting highlighted the historical returns and volatility associated with large, mid, and small-cap stocks, revealing that mid-cap stocks have historically provided the best risk-adjusted returns.

The discussion emphasized the importance of valuation as a key driver of future returns. It was noted that many market segments are currently overvalued, particularly large-cap growth stocks, while mid and small-cap value stocks appear relatively undervalued. This insight led to a recommendation to increase the allocation to mid-cap stocks, which have shown strong performance with lower volatility compared to small-cap stocks.

The current investment strategy was reviewed, revealing an overweight position in large-cap stocks and an underweight in mid-caps. The committee recognized that this underweight position in mid-caps, while seemingly minor at 2%, translates to a significant 10% underweight in a market segment that is crucial for balanced growth.

To address this imbalance, the committee proposed swapping their current broad passive allocation from a large-cap index (Schwab S&P 500) to a broader index (Russell 1000). This change would effectively shift funds from large-cap stocks to mid-cap stocks, aligning the portfolio more closely with the identified opportunities in the mid-cap segment.

The meeting concluded with a consensus on the need to adjust the investment strategy to better reflect the current market dynamics, aiming to enhance the overall performance of the Retiree Benefit Trust while managing risk effectively. This strategic shift is expected to benefit the county's retirees by ensuring a more robust and balanced investment approach.