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.
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.
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.