New CalPERS Asset Allocation Starts July 1


The California Public Employees Retirement System’s new asset allocation, which increases its alternative investments while reducing its public equity holdings, takes effect July 1.

“Over the past decade, we have made strides to improve our funding status and reduce investment risk,” CalPERS said in a statement. Tweeter. “We increased liquidity, took more defensive positions in public markets and added cautious leverage to increase diversification.”

After nearly a year of reviewing the pension system’s investment portfolio and actuarial liabilities, CalPERS’ board decided in November to adjust the asset allocation of its $442 billion portfolio by increasing its private equity weighting and decreasing its equity holdings. The board also approved the addition of 5% leverage to increase diversification.

The new asset allocation target is 42% global equities, 30% fixed income, 15% real assets, 13% private equity and 5% private debt. CalPERS said the allocation is 105% due to the 5% allocation to leverage. The current target asset allocation is 50% global equities, 28% fixed income, 13% real assets, 8% private equity, 1% cash and 0% private debt. According to CalPERS’ latest monthly update, the portfolio’s actual asset allocation as of May 31 was 45.5% in public equities, 27.1% in fixed income, 14.6% in real assets and 11. 7% in private shares.

Although the change takes effect today, “it won’t be like flipping a switch,” a CalPERS spokesperson said. For example, if the investment team does not immediately see strong private equity investments, staff will have to wait before increasing their private equity investments.

“It’s a balance between aligning as close to the new allocation as possible, while taking into account the current market and making the best decision to get the best returns/balance the risk for the fund,” said the spokesperson.

The review process that led to the decision to adjust the allowance, which takes place every four years, included a review of demographic assumptions, including life expectancy, retirement and disability rates and potential changes in job growth and wages, according to CalPERS. A press release from the fund says the board considered different investment portfolios and their potential impact on the CalPERS fund, and that each portfolio featured a different mix of assets and a corresponding rate of expected return and volatility. risks. The release also says the most recent findings from CalPERS show that the life expectancy of healthy limbs at age 55 has increased slightly compared to the last study in 2017, as men are expected to live about eight months longer and women five more months since the previous study.

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Tags: alternative investments, alts, asset allocation, California Public Employees’ Retirement System, CalPERS, private equity, public equity


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