CalPERS’ private equity returns set a record

The alternative investment assets of California’s public retirement fund grew by 12.7 percent, with private equity generating a $1 billion profit in the last fiscal year.

The California Public Employees’ Retirement System (CalPERS) has announced a 16.7 percent return on its investments for the one-year period ended in June, increasing the value of its current portfolios by $22.7 billion.

The assets of CalPERS’ Alternative Investment Management Program, which specialises in private equity, reported an increase of 12.7 percent, exceeding its 9.7 percent benchmark, according to a statement. For the 2003-2004 fiscal year, the private equity program earned $1 billion in profits. Since its inception in 1990, the private equity arm has garnered CalPERS $6 billion.

In the statement, chief investment officer Mark Anson said CalPERS “set a record for special efforts taken by the Fund’s investment staff.” The fund’s top performing portfolio was its investments in corporate governance funds, which earned the system a walloping 53.5 percent return.

CalPERS expects its performance to “provide hope to the state and local public employers who are responsible for making contributions to fund the benefits.” The fund reported low to negative returns over the past three years, which has caused a trend of rising employer contribution rates. The most recent returns will factor into rates to be set for the 2005 to 2006 and 2006 to 2007 fiscal years.

CalPERS is the largest public pension fund in the US, last reported to be worth approximately $160 billion, and manages $20 billion in capital in its globally diversified private equity portfolio. Earlier this month, it announced the appointment of Leon Shahinian as senior investment officer for its alternative investment programme Shahinian, who joined CalPERS in 1998, takes over from Rick Hayes, who left last month to become a managing partner at Oak Hill Capital Management, the New York-headquartered alternative asset specialist.