CalPERS to boost PE allocation

CalPERS is set to increase its commitment to alternative assets to seven per cent, the first such increase at a time when its asset base is contracting.

CalPERS, the Californian Public Employees’ Retirement System, is to vote on an increase in its commitment to private equity and real estate investments as the fund seeks to maintain its returns through a slump in the public markets.

In a statement to committee members, the fund said: ‘For the first time in over a decade, staff and the Investment Committee are faced with an asset allocation decision at a point in time when the asset base of CalPERS has declined.’

As a result the fund is planning to adopt what it describes as a ‘more aggressive asset mix’. This will involve reducing the fixed income target of the fund by two per cent to 26 per cent and increasing private equity and real estate by one per cent each, to seven per cent and nine per cent respectively. The proposal would keep US stocks at 39 per cent and international stocks at 19 per cent.

CalPERS is also seeking greater flexibility in changing from one asset class to another dependent on performance. ‘If economic circumstances warrant such action, staff will bring a recommendation to the Investment Committee as part of its annual Investment Plan.’  The statement added that any recommended change to a target would not exceed two per cent.

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

The pension fund's thirteen-member policy committee will vote on the proposal October 15. The new targets will guide CalPERS' investment choices over the next three to five years.