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CalPERS considers revising PE target every year

  • Pension may adjust policy target in line with actual allocation
  • CalPERS has 12 percent allocation to asset class
  • Staff recommends interim target of 10 percent, and more flexibility

The investment committee of the $285 billion pension system will consider a proposal for an interim private equity target of 10 percent at a meeting next week. The staff is also endorsing annual revisions of the interim target based on market conditions and other factors, rather than setting a multi-year plan now, CalPERs spokesman Joe DeAnda said in an email to Buyouts. The allocation target range would be 6 percent to 14 percent.

Pension Consulting Alliance Inc. (PCA), the CalPERs consulting firm recommending the allocation target changes, said they were partly driven by market conditions.

“PCA does not believe that ’filling an asset allocation bucket’ just to meet a long term goal, for the illiquid and most expensive assets to manage, makes sense,” according to a memo prepared by the consulting firm for CalPERS. ”PCA believes that the mechanical allocation of non-publicly traded assets that may dilute that asset class’ rate of return over time is sub-optimal and encourages the Investment Committee to move towards the target in a more deliberate manner.”

In February, CalPERS pared back its allocation target for private equity to 12 percent from 14 percent, in line with its actual allocation level at the time.

Separately, CalPERS on May 13 officially launched its search for a new chief investment officer to head up its office of 400-plus professionals.

Among the job requirements, the CIO is responsible for “developing prudent, forward-thinking investment strategies,” the retirement system said. ”The person in this position must be a strategic investment thinker, demonstrate a deep understanding of asset allocation, have a strong commitment to prudent risk management and be an outstanding leader for a dynamic team of investment professionals.”

CalPERS said it hired Korn/Ferry International to conduct the global search.

Joseph Dear, the former CIO for CalPERS, died on Feb 26 at age 62 after battling prostate cancer.