CalPERS Approves VC, High Yield Commitments

March 22, 2001 ( - The California Public Employees' Retirement System (CalPERS) has approved a $500 million investment in California Emerging Ventures (CEV), an investment vehicle that targets venture capital investments.

As reported yesterday, the nation’s largest public pension system also voted to increase its exposure to high yield (“junk”) bonds to a maximum of 10% of its $37 billion domestic fixed income portfolio from the previous 5% level.

Yield “Curve”

CalPERS held $557 million of high yield debt, 1.5% of the total fixed income portfolio, as of December 31, 2000.

CalPERS currently manages the entire high yield allocation internally, but plans to begin a search for high yield external managers in May.

Those managers will be required to enter into a strategic relationship which would include training of CalPERS staff – which plans to develop an in-house investment team to manage some or all of the portfolio within three years.

Capital “Venture”

CalPERS’ commitment to CEV increases the pension fund’s exposure to venture capital investments to more than $2 billion. CalPERS previously committed $730 million to CEV which is managed for the pension fund by Wesley, Massachusetts-based Grove Street Advisors.

Preliminary performance analysis shows that the CEV fund generated a gross internal rate of return of 78% for all its portfolio investments as of September 30, 2000 according to the CalPERS press release.

CalPERS is the nation’s largest public pension fund with assets totaling more than $169 billion.