CalPERS cuts interim PE allocation to 8 pct

  • Long-term allocation remains unchanged
  • CalPERS reviews interim allocations to account for short-term trends
  • PE portfolio valued at $25.4 bln

California Public Employees’ Retirement System slashed its interim allocation for private equity to 8 percent from 10 percent, spokesman Brad Pacheco told Buyouts in an email.

The adjustment did not involve changes to CalPERS’s long-term strategic allocation to PE, which stands at 12 percent. The adjustment to its interim allocation will not bear on the retirement system’s plan, unveiled at its November meeting, to commit as much as $4 billion to new PE funds in the 2016-2017 fiscal year, spokeswoman Megan White said.

The strategic allocation is determined every four years when CalPERS assesses its long-term risks and expected returns, White told Buyouts in an email. The interim asset allocations are developed by staff each year and approved by the investment committee to address shorter term (one- to five-year) market conditions, valuations and situations.

The downward adjustment likely reflects a change in CalPERS’s outlook for other asset classes, as its planned commitment pace and long-term allocation to PE remains unchanged. CalPERS held 8.4 percent of its assets in PE as of Oct. 31. Its current allocation was valued at $25.4 billion as of the same date.

The $303.4 billion retirement system unveiled its new interim asset allocation in a slide at its Dec. 19 meeting. The investment committee approved the change in a closed session at its September meeting, Pacheco said.

CalPERS has committed $3 billion to $4.2 billion to PE each year since 2013, pension documents show.

CalPERS’s commitment pacing remained steady even as it became increasingly selective in choosing new fund managers, opting instead to commit larger amounts to select general partners. In October, the system committed $270 million to Stone Point Capital’s latest flagship fund, Trident VII.

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