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CalPERS reports 8.9% annual PE returns

The asset class underperformed its benchmark by 221bps.

The California Public Employees’ Retirement System’s private equity portfolio generated absolute returns of 8.9 percent for the year ending 30 June, underperforming its benchmark by 221 basis points.

In a statement announcing the release of its 2014-2015 preliminary investment return results, CalPERS said that private equity accounted for approximately 9 percent of the $301 billion fund at the end of June. This is slightly below the 10.3 percent reported at the end of December, equivalent to $30.5 billion, and its interim target of 10 percent, according to data on its website.

Overall, the pension fund reported a 2.4 percent net return on investments for the 12 months, underperforming its benchmark by nine basis points.

Returns for the past three years stood at 10.9 percent and 10.7 percent for five years. These exceeded its assumed investment return of 7.5 percent.

Its 20-year investment return stood at 7.76 percent at the end of June.

The fund’s real estate investments, which account for about 10 percent of the fund and generated returns of 13.5 percent, contributed to this year’s “modest gain”, the fund said in a statement. Real estate outperformed its benchmark by 114 basis points.

Infrastructure returned 13.2 percent, outperforming its benchmark by 932 basis points.

However, comprising more than half of its portfolio, public equity was a key determinant of returns, generating one percent against a benchmark of 1.3 percent.

Fixed income, CalPERS’ second largest asset class accounting for about 18 percent of its assets, outperformed its benchmark by 93 basis points, returning 1.3 percent.

CalPERS is chasing private equity funds for information on carried interest payments deducted from its investments since the pension fund first made its commitment, Private Equity International reported previously. It will begin to report the data in autumn for the fiscal year ending in June. The move follows a decision announced in June to halve the number of external managers it uses to cut costs.

The City of Milwaukee Employes’ Retirement System joined the chorus calling for greater fee transparency in an open letter published by its chief investment officer demanding more information on fees, internal controls and subscription documents.