US - CalPERS is to complete a review by December to address asset allocation imbalances in its global equities and alternative investments classes.
While global equities have a target asset allocation of 56% of the total portfolio, the allocation fell to 43.7% at the end of October as a result in steep declines in equity valuations. While CalPERS allows for variations of 5% for global equities, the asset class fell to 12.3% below target.
Meanwhile, alternative assets made up 13.7% of the portfolio of the end of October, above the target and 9.5% and 1.2% above the allowable policy range of 3%. From Q1 2009, the policy target for alternative investments will be raised to 10%.
Global fixed income was 1% below target and real estate 1.8% above target but within the allowable range. Inflation linked assets were also within range, while 7% (US$13.3bn) was held in cash, compared to the policy target of 0%.
Explaining the impact of the asset allocation issues, CalPERS said in a report: "Staff estimates that the underweight in global equities during Q3 2008 when equity returns were negative has added around 60 basis points of incremental return to the Public Employees' Retirement Fund from the asset allocation effect."
As of 31 October, the total fund value was $191.2bn, down from $213.5bn as of 30 September.
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