CalPERS lowers investment risk, trims PE allocation

The changes reflect new demographic assumptions - specifically that public employees are living longer - and are designed to ensure the system's long-term sustainability. However, CalPERS said in a statement that its investment strategy would remain largely the same, with the long-term assumed rate of return still 7.5%.

In addition to trimming the private equity allocation, equities will drop from 50% to 47%, while fixed income rises from 17% to 19%. Real estate and inflation-sensitive securities each jump by two percentage points to 11% and 6%, respectively, and infrastructure and forestland rises from 2% to 3%. Cash will drop from 4% to 2%.

As of October 2013, CalPERS' actual private equity allocation was 11%, or $31.2 billion. Emerging markets, including Asia, are understood to account for one tenth of this allocation. The PE portfolio delivered a 12.24% return in 2012, compared with a sector benchmark of 28.45%.

The pension fund launched a strategic reorientation of its program in 2011 with a view to focusing on a smaller number of managers. Between September 2011 and December 2013, the number of GP relationships fell from 398 to 389, while the number of PE funds receiving commitments dropped from 762 to 741.

Real Desrochers, senior investment officer for private equity, said last December that the goal is to reduce the number of managers to around 120.

During the same period, CalPERS invested $7.4 billion in private equity, comprising $4.7 billion has been in fund commitments, $600 million in co-investments and $2.1 billion commitments to customized investment accounts.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• LPs
• North America
• LPs
• USA
• California Public Employees' Retirement System (CalPERS)