CalPERS Adjusts Private Equity, Cash Allocations

According to a CalPERS press release, the action is in response to the misalignment of the portfolio in the wake of the financial market crisis of 2008. “This is not intended to be a long-range strategy but reflects our preference for higher liquidity and moderate risk, as well as the flexibility to respond to challenges and opportunities in the markets,” said George Diehr, chair of the CalPERS Investment Committee, in the announcement.

The CalPERS Board increased the target allocation for its Alternative Investment Management (AIM) program, or private equity, from 10% to 14%, and global fixed income from 19% to 20%. It reduced global equity (mostly public stocks) from 56% to 49% and raised its cash target from 0% to 2%. Target allocations for real estate and inflation-linked assets were unchanged, at 10% and 5%, respectively.

The pension fund said it plans to follow up on the mid-course adjustment with a more full-blown asset allocation and liability analysis that is tentatively scheduled for the fall of 2010 to take effect in 2011 through 2013. The revised mix of assets does not significantly change the expected return or volatility of returns compared with the previous asset allocation, and does not significantly change the expected level of employer contributions or the volatility of those rates.

CalPERS is the nation’s largest public pension fund, administering retirement benefits for more than 1.6 million active and retired State, public school, and local public agency employees and their families on behalf of 2,600 California public employers.