CalPERS considers change to PE benchmark

The pension may move away from a custom benchmark citing “unintended risk”

The California Public Employees’ Retirement System is considering a change to its custom private equity performance benchmarks according to a presentation given to the board today.

The change is reportedly coming as the pension is seeing its $31.1 billion of investments in private equity underperform.

This isn’t the first time this year CalPERS is taking a closer look at its private equity portfolio. As PEI reported in both May and July, the pension readjusted its target allocations citing recent cash infusions from realizations and an overall “de-risking” of the portfolio. CalPERS 10-year return on private equity fell short of internal benchmarks over the summer and has failed to rebound substantially.

According to a Bloomberg report, CalSTRS has already switched from an internal benchmark to the GX Private Equity Index offered by State Street.

If CalPERS approves the switch it could look at external benchmarks already provided by firms like State Street. The pension is scheduled to re-evaluate all of its portfolio benchmarks in 2015.

CalPERS may also be retooling how it manages the competitive bidding process for top performing managers. Recommendations presented today included a push for state legislation that would allow the pension to go around existing competitive bidding frameworks to fast track top performing managers that are up for renewal. If successful, that could cut down allocation timeframes significantly.