CalPERS Moves $150 billion Under New Strategic Asset Allocation

As part of the implementation of a new strategic asset allocation adopted in December 2017, the California Public Employees’ Retirement System shifter $150 billion. This according to an article in Pensions & Investments.

“The pension fund’s strategic asset allocation implementation includes 15% invested in a new factor-weighted equity portfolio, as well as 35% in capitalization-weighted equities and 8% in private equity, which together make up its 58% growth portfolio,” the article reports. The fund also moved 3% of its fixed-income portfolio to high yield.

According to the article, CalPERS also implemented a new “opportunistic program” which has an allocation limited to 3% of assets and encompasses three components:

  • execution services and strategy—a new team for all of CalPERS’ trading operations, security lending, liquidity and leverage management;
  • enhanced beta—a LIBOR and futures-based strategy using structuring and synthetic securities
  • opportunistic investing—in shorter-term market valuation or “structural anomalies.”

The article cites comments made by Eric Baggesen, CalPERS’ managing investment director for asset allocation, to the investment committee last month. According to Baggesen, in fiscal 2020 the CalPERS staff will be reviewing its use of active risk—which resulted in negative returns in 2019—to increase discipline in that area. He said, “We are utilizing risk and taking variances from the structure of this strategic allocation. It can be weight variances from the strategic asset allocation.”

The article reports that CalPERS underperformed its benchmark in the one-, three-, five-, and ten-year periods ended June 30th.