CalPERS cuts private equity allocation by 1%

California Public Employees Retirement System (CalPERS), the largest pension fund in the US, has announced its intention to increase its allocation to shares while decreasing its exposure to private equity and real estate.

According to Reuters, CalPERS on Monday said it would reduce its target commitment to private equity programmes by one percent (from seven percent of the total to six percent) and to real estate programmes also by one percent (from nine percent of the total to eight percent).

In a simultaneous move, CalPERS will increase its target exposure to US equities from 39 percent of the total to 40 percent and to international equities from 19 percent to 20 percent. The portion of the portfolio accounted for by global fixed income investments will remain the same at 26 percent.

Reuters said officials at the $177 billion CalPERS fund insisted that the new asset mix did not represent a negative outlook for real estate and private equity. One reason for the move cited by the officials was that a seller’s market in real estate enabled it to take out some profits. The fund added that the new asset allocation would better reflect current holdings, reduce risks and save money on transaction costs.                 

The re-balancing moves the fund’s proportion of private equity exposure back to the level of October 2002, the date at which portfolio allocations were last amended. Then, the private equity target was raised while that for bonds was lowered.

In recent times, CalPERS has been at the sharp end of investor demands for greater transparency. Last week, The California First Amendment Coalition (CFAC), a public disclosure advocacy group, posted a list of fees paid to and distributions from private equity and hedge funds to which CalPERS has made capital commitments.

The data disclosure is part of a lawsuit settlement between CalPERS and CFAC, which had sued to gain access to information about the fees and profits associated with each private equity fund in the CalPERS portfolio.