US - The US$177bn California Public Employees Retirement System is considering reducing its policy allocation to real estate and alternative investments by 1% and increasing domestic and international equity by 1% to more closely reflect actual current holdings.
CalPERS’ investment committee will vote on the revised asset allocation policy mix – which came out of the fund’s recent asset/liability management workshop – next Monday December 13.
The fund’s current policy allocation stands at 0% cash, 26% global fixed income, 39% US equity, 19% international equity, 7% alternative investments and 9% real estate.
Under the new policy, the real estate target would be reduced from 9% to 8% but the range expanded from 7-11% to 4-12% to allow for “more tactical positioning of the portfolio”.
The allocation to alternative investments would be reduced from 7% to 6% and the range expanded from 5-9% to 3-9%. Domestic equity would rise from 39% to 40% and international equity 19% to 20%.
Global fixed income would remain unchanged at 26%.
“The overall result will be to align our asset allocation policy mix more closely with actual current holdings, thereby reducing transaction costs from rebalancing, as well as minimising the significant performance risk associated with the mismatch of our policy allocations for real estate and alternative investments versus the size of the current portfolios,” CalPERS said in its agenda notice.
CalPERS’ actual current asset allocation is 0.4% cash, 26.1% global fixed income, 40.2% US equity, 21.2% international equity, 5.1% alternative investments and 7.1% real estate.
The fund cited concerns that fund growth could see its allocation to real estate and alternative investments shrink below policy targets as the reason for reducing the policy allocation to the portfolios.
However consultant Wilshire says the new real estate range would be too wide at 4-12% and suggest a range of 5-11%.
The fund plans to hold the next asset/liability management workshop in three years.
The registration deadline for the Workplace Savings & Benefits Awards 2019 is today.
This week's top stories were the DWP giving the green light to CDC and TPR granting extensions for 11 master trust authorisation applications.
Susan Martin says building strong foundations for business are the only way forward as the pensions industry is radically shaken up
The Pensions Regulator (TPR) has granted Now Pensions a six-week extension for its master trust authorisation application after the 31 March deadline, PP can reveal.