As of Oct. 31, CalPERS’s actual allocation to alternative investments stood at 13.7 percent, well above an interim target of 9.5 percent for the third quarter, according to the details of an asset allocation update on Nov. 17. Taking into account an allowable range of plus or minus 3 percent, the actual allocation was about 1.2 percentage points above the upper range limit. CalPERS includes venture capital, buyout and acquisition financing, expansion capital and mezzanine debt financing under the alternative investments classification.
October was a difficult month for CalPERS, which saw its total fund value drop more than 10 percent to $191.2 billion, down from $213.5 billion at the end of September. The selling has knocked overall allocations, not just those to private equity, out of whack. The fund’s actual allocation to global equity was pushed down to 43.7 percent at the end of October, well below its policy target of 56 percent. Interestingly, cash made up 7 percent of the fund’s value, roughly $13.3 billion. CalPERS has a zero percent policy target for cash, and, as reported in Buyouts, has acknowledged it’s taking steps to coordinate capital calls with its general partners.
CalPERS’s staff and consultants Wilshire Associates and Pension Consulting Alliance will present additional proposals for dealing with asset allocation issues this month.
Meantime, the pledges to private equity keep coming. CalPERS recently committed $500 million to
reported in its Oct. 6 issue that CalPERS planned to consider adjusting its allocation to private equity this fall, as the denominator effect, slower distributions and continued capital calls appeared to be nudging the program past the top of its range. At that time, CalPERS also said it intends to be more responsive to market dynamics and is trying harder to monitor its asset allocation targets and to adjust them sooner than every three years, if needed.