CalPERS’ performance nosedives

“About what we expected,” says CIO

Assets under management at the California Public Employees’ Retirement System, the nation’s largest public pension, dropped 23.4% between June 30, 2008, and June 30, 2009, its steepest ever year-over-year decline.

Moreover, its private equity portfolio lost 31.4% of its value, with a value of $23 billion through March 31, according to newly released information.

In a statement, CalPERS’ CIO Joe Dear called the results unsurprising.

“It is about what we expected given the collapse of markets across the globe,” he said. “The good news is we have the opportunity to capture future returns because of our long-term investment horizon. The system has more than enough cash through contributions and income from investments to meet our present liabilities, so we are in a good position to ride out the current downturn and come out stronger.”

The state pension also took pains to spin the news by mentioning that its long-term 20-year investment return remained positive at 7.75 percent. In a release, CalPERS also points out that although its performance was lousy, world equity prices performed even more poorly, declining 29.3% during the same period.

CalPERS—which had enjoyed supercharged growth through its private equity portfolio until last year—isn’t exactly shying from the aggressive investment philosophy it’s been relying on for much of this decade.

Last month, it announced that it was upping its private equity investment target to 14% from 10%, with a range of 9% to 19 percent. Private equity and venture capital investments currently represent 13% of the state pension’s assets.

“This is not intended to be a long-range strategy, but reflects our preference for higher liquidity and moderate risk, as well as the flexibility to respond to challenges and opportunities in the markets,” said George Diehr, chair of the CalPERS investment committee, in a prepared statement last month.

Among its recent investments, CalPERS committed $200 million to Khosla Ventures; $500 million to The Blackstone Group’s Blackstone Capital Partners VI; and $192 million to Candover Investments’ Candover 2008.