CalPERS Backs Off Hedge Plans

November 13, 2000 ( - The nation's largest public pension system has officially - and dramatically - cut back on previously announced plans to invest as much as $12 billion to hedge funds.

According to its web site , the California Public Employees’ Retirement System (CalPERS) will commit $1 billion to hedge fund investments, less than 1% of the system’s total assets. The Web site says the recommendation will ” eliminate the confusion in the market regarding prior press announcements that CalPERS intends to commit $12 billion to hedge funds.”

The ambitious investment plan was touted by prior Senior Investment Officer Bob Boldt last year, who had suggested the fund could commit as much as 25% to hedge funds – sentiments that led some to speculate that a wave of pension investments could follow. However, the notion was never supported by then CIO Sheryl Pressler or the board. Boldt and Pressler resigned from CalPERS earlier this year.

CalPERS intends to target hedge funds with equity exposure, limiting those exposed to credit risk. They are planning 5 to 10 hedge fund investments, with any single investment in excess of $200 million brought to the Investment Committee for approval.

They plan to solicit bids for an investment partner for this vehicle that will:

  • screen potential hedge funds
  • perform the due diligence prior to investment
  • monitor performance after investment

Investment authority will remain with CalPERS staff, however.

CalPERS also noted its recent investment in InvestorForce.Com, and intends that each hedge fund in which CalPERS invests will be required to report their trading and performance data to InvestorForce. This information will be analyzed using the risk analysis platform contained within InvestorForce, in addition to any risk management performed by the investment partner.