CalPERS positions infra portfolio for growth outside the US

The pension fund sees a more robust infrastructure pipeline in Western Europe, Australia and Canada.

The California Public Employees Retirement System is considering revising a policy for its real assets programme that will enable the pension fund to allocate more capital to infrastructure investments outside the US, according to meeting materials.

The $360.1 billion pension, the largest public pension fund in the country, is “expecting future investment opportunities” in the asset class “to be greater” in other developed markets than in the US, according to documents published on its website.

CalPERS’ real assets group, which is led by managing investment director Paul Mouchakkaa, recommended the pension fund’s investment committee increase the permitted net asset value percentage ranges for infrastructure. The proposal is to increase the maximum exposure for infrastructure in international developed markets from 50 to 60 percent, and to reduce maximum exposure for US infrastructure from 50 percent to 40 percent.

“The opportunity in the US is limited and focused on power primarily,” CalPERS wrote in the meeting materials. “The current opportunity pipeline for infrastructure is primarily located in Western Europe, Australia and Canada.”

A spokeswoman for the pension fund declined to comment.

As of 30 June, CalPERS managed a $4.3 billion infrastructure portfolio, with 44 percent invested in power assets and 46 percent invested in transportation. Fifty-five percent of the portfolio was invested in the US and 45 percent in international markets.

The pension fund said the change in policy will not impact its broader real assets portfolio, which has a $38.1 billion NAV. The changes would give infrastructure the lowest possible US allocation among other real assets, including real estate and forestland, and the highest possible international exposure.

The policy shift indicates CalPERS believes the best chance to build its infrastructure portfolio lies outside the US, despite a growing interest from the investment community for opportunities in the US market.

Fund managers have raised billions of dollars in capital in recent years from US institutional investors seeking access to US infrastructure, which politicians have signalled could become available to the private sector. President Donald Trump campaigned in the 2016 election on passing a large-scale infrastructure package once in office, but efforts to see that through have yet to materialise.