CalPERS to Up Alternative Investments: Report

May 12, 2000 ( - CalPERS, the nation's largest pension system, is continuing the trend toward more alternative investments by considering to transfer about $7 billion of its $174 billion in assets from stocks to private equity and real estate, according to a report by Bloomberg News Service.

The shift would mark the first time in three years that the California Public Employees Retirement System changes its asset allocation. The news service cited reports released by the public fund. It highlights the trend among pension funds to increasingly invest in alternative vehicles that may yield higher returns than the stock and fixed-income markets.

If staff recommendations are followed, CalPERS would:

  • lower exposure to US equities to 39% of assets from 41%
  • lower exposure to international shares to 19% from 20%
  • increase exposure to private equity to 6% from 4%
  • increase exposure to real estate to 8% from 6%
  • eliminate its 1% cash allocation

In its report, the CalPERS staff said it expects a return on US equities of 9.6% annually in the next decade, compared with 13.5% for private equity and 8.5% for real estate.

The investment committee will discuss the recommendations May 15 and may not approve all staff recommendations.