Private equity boosts CalPERS performance

The private equity programme of the largest US pension fund beats its benchmark, but lags behind the performance generated by real estate and international stocks.

US pension fund Calpers’s alternative investment programme, which invests in private equity and venture capital, has delivered a return of 19.2 percent in the 12 months to 30 June, helping lift overall performance to 12.3 percent.

It is the third year in a row the pension fund has made a double-digit return. The private equity earnings were ahead of the asset class’ benchmark of 18.6 percent but they were not the best performer.

Russell Read, chief executive, CalPERS

That honour went to the fund’s real estate portfolio which returned 38.4 percent on its investments in office, retail, apartment, and industrial assets.

International equities took second spot in a ranking of asset’s returns with a return of approximately 27.2 percent, below the benchmark of 27.7 percent. US domestic stocks earned 9.6 percent, beating the benchmark of 9.5 percent.

The $208bn fund generated about $8bn more than it would have produced if it had only hit its assumed rate of return of 7.75 percent – the annual target deemed necessary to meet future liabilities.

Its average annual investment return over the past 10 years is 9.2 percent.

In March this year Calpers said it was simplifying its private equity investment programme to produce investment groups that would work as cutomised funds of funds.

The fund’s absolute return strategies netted an 11.6 percent return, outstripping the hedge fund benchmark of 8 percent.

Its corporate governance funds, which invest in underperforming public companies, posted a 17 percent return compared to a benchmark that earned 20.3 percent.