US - The US$180bn California Public Employees' Retirement System (CalPERS) has bought a five-storey office building in Sacramento, adding to its US$11.4bn real estate portfolio.
CalPERS asset allocation to real estate stands at 6.2% but the fund has a target allocation of 8%.
“These properties are a good addition to our commercial real estate portfolio and will generate additional income and help anchor our future housing developments along R Street,” said Charles Valdes, CalPERS investment committee chair.
The office building at 400 R Street includes more than 211,000sqft and currently houses the California Department of Consumer Affairs. The fund also acquired the accompanying parking structure as part of the deal.
“We will hold these properties in our investment portfolio and continue their existing use,” said Michael McCook, senior investment officer for CalPERS real estate programme.
The latest acquisition follows a number of building and land purchases along R Street.
Separately, CalPERS committee has recommended the board adopt its “smoothing” proposal, flagged by Global Pensions last month.
The proposal calls for spreading of the fund’s market value asset gains and losses over 15 years, instead of the current three years. The plan would widen the “corridor” limits for establishing the actuarial value of assets from 90-110% of market value, up to 80-120%.
“This proposal is a common sense solution to the overriding concern about the volatility of employer contributions,” said Kurato Shimada, chair of the benefits and programme administration committee.
The committee also received an update on the concept of pension contribution stabilising accounts. Employers could tap into the reserve accounts when they are required to increase contributions to compensate for poor investment returns.
Staff at CalPERS is expected to produce a full recommendation by August 2005.
“Our research on this idea is continuing,” said chief actuary Ron Seeling. “Our goal is to develop a financial model of such a programme to make sure it will accomplish all of the Board’s goals.”
The fund first discussed rate stabilisation concepts in September last year.
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