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CalPERS increases private equity and real estate allocations

The largest US pension fund has approved an increase to the asset class, which will now be allocated 10 percent of CalPERS’ $250bn portfolio.

The California Public Employees’ Retirement System has approved a new mix of asset allocations, which include increasing its private equity target from 6 percent to 10 percent. The change will be counterbalanced by a decrease in allocations to publicly traded equities, which will now constitute 56 percent of the pension’s $250 billion portfolio.

The US’ largest pension fund also increased its real estate allocation to 10 percent from 8 percent, while its new inflation-linked assets bucket will have a 5 percent allocation. Offsetting these changes are a decrease in the target allocation of fixed income investments, which will now constitute 19 percent rather than 26 percent.

“These revised allocation markers reflect the promise of our private equity, real estate, and asset-linked investment classes,” Charles Valdes, investment committee Chair, said in a statement. “By hitting the reset button every few years, we keep our portfolio balanced and diversified in a fluid market that never stands still.”

CalPERS said despite theses changes to its investment strategy, it will continue to target two thirds or 66 percent of its portfolio to public and private equities combined.

The pension expects to deploy capital based upon the newly approved allocation targets over the next two to three years, at which point it will likely review its allocations again.

CalPERS also set ranges for investment relative to asset class allocation; private equity has a range of +/- 5 percent, while real estate has a range of +/- 3 percent and inflation-linked assets will make up zero to 5 percent of its portfolio, the pension said.