CalPERS assets fall to four-year low

The US pension fund has reported an eight per cent fall in its assets during the past year, caused in part by pressure on the value of its private equity interests.

The California Public Employees’ Retirement System (CalPERS), tha largest US public pension fund, has fallen to its lowest level since 1998 with public market sentiment the driving force behind the drop.

The fund, which manages pension benefits for nearly 1.3m public employees and retirees and one of the biggest investors in private equity, has fallen to $143.4bn in assets in the year to June 30, a drop of six per cent in the past twelve months.

The six per cent drop in value was borne out in the figures for the fund’s private equity portfolio, which fell 7.8 per cent. Only CalPERS' real estate portfolio, which increased in value by 11.8 per cent, remained firmly in the black, preventing the fund from suffering greater losses. The biggest fall occured in the fund’s public sector investments, which fell by 16.8 per cent.

The 7.8 per cent reduction for private equity was below its hurdle rate but above the average private equity market. According to data released by Venture Economics, private equity investments lost 14.6 per cent in the first nine months of the 2001-02 financial year.

Last year CalPERS increased its exposure to private equity acquiring a five per cent stake in US private equity firm The Carlyle Group for $175m and a minority stake  in a venture capital unit of buyout firm Texas Pacific Group, for which it paid $60m.

The pension fund's assets have fallen to the level last seen in June 1998 from a peak of $172bn in 2000 although over the past five years, CalPERS has posted an average annual gain of 5.4 percent.

CalPERS now has about 57 per cent of its assets in stocks, 29 per cent in bonds and nine per cent in real estate. Private equity investments make up the balance, with approximately $20bn allocated to the asset class.