CalPERS posts $12.1bn first quarter loss, makes $2.2bn in commitments

The influential institutional investor saw its alternative investment program return 5.3 percent, while public equities languished.

The California Public Employees’ Retirement System posted a 5.3 percent gain in its alternatives portfolio but lost roughly $12.1 billion (€7.8 billion) in total assets due largely to lacklustre equity market returns, according to a Wilshire Associates analysis.

Submitted to CalPERS’ investment board earlier this month, the study revealed that CalPERS’ total assets under management declined 4.4 percent for the first quarter of 2008 to $240.9 billion, down from $253 billion for the fourth quarter of 2007 and an all-time quartile peak of $254.6 billion in the third quarter of that year.

The quarter-to-quarter decline is the steepest the pension fund has experienced since the 2001-2002 recession.

Despite setbacks in the public equity markets, CalPERS’ alternative investment program comprised one of the pension’s top performing asset classes, returning 5.3 percent and outperforming its benchmark by 0.8 percent for a total market value of $23.1 billion.

In contrast, the pension’s total global public equity exposure yielded a return of -9.7 percent, trailing the benchmark by 0.3 percent.

Although returns from alternative investments are down significantly in absolute terms from last year, in which alternatives produced a 23.2 percent gain, the Wilshire Associates report said the alternatives program “has continued to contribute favorably to the total fund policy for the one, three, five and ten year periods”.

The Wilshire study cited alternatives statistics from the fourth quarter of last year, as there is a one quarter lag time for reporting those figures. However, the report did factor in fourth quarter alternatives performance in the fund’s first quarter overall return figures.

CalPERS’ secondary fund commitments yielded an 18.2 percent annualized return through December 31 of last year, while its venture fund commitments returned 7.4 percent, growth fund commitments 4.9 percent, and special situations funds 5.6 percent. The report did not disclose buyout statistics.

The Wilshire analysis also revealed a 1.6 percent return for CalPERS’ real estate investments, although that figure trailed the policy benchmark by 1.6 percent .

According to the pension’s latest internal estimates, CalPERS currently manages $240 billion in assets.

In related news, CalPERS has disclosed a new round of hefty private equity commitments, including: $1 billion to Apollo Credit Opportunities, a distressed debt fund; $500 million to Capital Link Fund II, a Centinela Capital fund of funds targeting emerging managers; $300 million to TowerBrook Investors III, a middle-market buyout fund; and $400 million to Yucaipa American Alliance Fund II, a multi-strategy growth fund.