US - The US$200bn CalPERS is to vote today on two proposals which would see the pension fund tender for relaxed-long enhanced index managers and international fixed income managers to form part of spring-fed pools.
The RFPs are being submitted at today’s investment committee meeting.
According to CalPERS, the Enhanced Indexing Initiative for its global equity programme will complement its existing line-up of domestic active and enhanced equity strategies and will allow managers to exploit security mispricing for both overpriced and underpriced securities.
In November 2005, investment committee staff presented an information item that explained how relaxing the long-only constraint was an improvement over traditional long-only equity portfolios. CalPERS hopes the new strategy will help it to achieve its performance target for global equities.
In December 2005, the fund’s risk management group tested the impact this strategy would have on CalPERS. The results of the test showed that it would have “little to no effect on total and active risk” depending on the amount of asset allocated.
Current estimates suggest that if CalPERS were to allocate $2bn to this strategy, based on its holdings in the sample portfolio, there would be a reduction in the total risk of the fund and an increase in active risk.
The search for international fixed income managers is expected to yield 10 to 15 candidates that will constitute a focus group. Two to three finalists' will be brought to the investment committee for final approval.
The fixed income programme currently consists of five managers, all of whom were hired in 2000 including Julius Baer and Baring. CalPERS implemented the international fixed income programme in 1989.
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