b'LOS ANGELES FIRE AND POLICE PENSION SYSTEM NOTES TO FINANCIAL STATEMENTS JUNE 30, 2025 AND 2024NOTE 6NET OTHER POST-EMPLOYMENT BENEFITS LIABILITY (Continued)Investment Return RateThe long-term expected rate of return on OPEB Plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of inflation and, beginning with June 30, 2023, any applicable investment management expenses) are developed for each major asset class. These returns are combined to produce the long-term expected arithmetic rate of return for the portfolio by weighting the expected arithmetic real rates of return by the target asset allocation percentage, adding expected inflation, and subtracting the expected investment expenses (beginning with June 30, 2023, only investment consulting fees, custodian fees and other miscellaneous investment expenses) and a risk margin. Beginning with June 30, 2023, this portfolio return is fully adjusted to an expected geometric real rate of return for the portfolio.The target allocation and projected arithmetic real rates of return for each major asset class, after deducting inflation, are shown in the following table. These values were used in the derivation of the long-term expected investment rate of return assumption in the actuarial valuations as of June 30, 2025 and 2024. This information may change every three years based on the results of an actuarial experience study.Target Allocation Long Term Expected RealPercentage Rate of ReturnAsset Class 2025 2024 2025 2024Large Cap U.S. Equity 23.00% 23.00% 6.00% 6.00%Small Cap U.S. Equity 6.00% 6.00% 6.65% 6.65%Developed International Equity 16.00% 16.00% 7.01% 7.01%Emerging Markets Equity 5.00% 5.00% 8.80% 8.80%U.S. Core Fixed Income 9.90% 9.90% 1.97% 1.97%High Yield Bonds 2.75% 2.75% 4.63% 4.63%Global Credit 2.75% 2.75% 0.89% 0.89%Real Estate 7.00% 7.00% 3.86% 3.86%Treasury Inflation Protected Securities (TIPS) 4.40% 4.40% 1.77% 1.77%Commodities 1.00% 1.00% 4.21% 4.21%Cash 1.00% 1.00% 0.63% 0.63%Private Credit 2.00% 2.00% 6.48% 6.48%Unconstrained Fixed Income 2.20% 2.20% 2.50% 2.50%Private Equity 14.00% 14.00% 9.84% 9.84%Real Estate Investment Trusts (REITS) 3.00% 3.00% 5.25% 5.25%Total Portfolio 100.00% 100.00% 5.80% 5.80%48 LAFPP ANNUAL REPORT 2025 33'