US - The US$172bn California Public Employees Retirement System is considering doubling its allocation to hedge funds to US$2bn through a $1bn investment split between direct investments and hedge fund of funds.
CalPERS – the largest public pension fund in the US – has previously only made direct investments in hedge funds. The fund had US$925m in hedge funds at the end of September and plans to have US$1bn committed by the end of the year.
If approved, the internal portfolio will comprise at least 75% of the assets in the fund’s Risk Managed Absolute Return Strategies program and hedge fund of funds (HFOF’s) will be limited to 25% or US$500m.
Chief Investment Officer Mark Anson (pictured) is set to recommend the investment committee approve the increased allocation at its November meeting on Monday.
Including exposure to HFOF’s in the portfolio is expected to increase scalability and materiality, reduce complexity, enhance timeliness, increase investment opportunities and increase expected risk-adjusted return, Anson said in his analysis to the committee.
CalPERS made its first investment in absolute return strategies in 2002. If the recommendation is approved, the additional US$1bn in capital will be allocated from the assets within the global equity portfolio.
During the past two years, CalPERS hedge funds have returned 5.6% a year compared to the 1.6% return of the Wilshire 2500 Index of US stocks for the same period.
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