Infra a rare bright spot for CalPERS

Infrastructure proved a friend to the massive US pension fund, returning 8.4%. As a whole, CalPERS underperformed its benchmark, posting a 1% fiscal gain.

The California Public Employees Retirement System (CalPERS) underperformed, but its infrastructure bucket didn’t.

The largest US pension fund, with $234 billion under management, returned just 1 percent on its investment for the fiscal year that ended June 30, lagging its self-imposed benchmark of 1.7 percent.

However, its allocation to infrastructure, hovering around 1 percent, didn’t disappoint. The asset class returned CalPERS 8.4 percent, according to the Sacramento, California-based organisation.

Overall, the fund admitted it has work to do to live up to its reputation as a bellwether institutional investor in America.

Citing a “challenging period,” chief investment officer Joe Dear blamed the debt crisis in Europe as well as slowing economic growth.

“It’s a clear reminder that we must remain focused on performance,” Dear said in a statement.

Though trailing infrastructure, private equity also provided CalPERS with a bright spot, gaining 5.4 percent. Real estate performed best, adding 15.9 percent for the year ending March 31.

Compared with absolute return (-2 percent) and equity (a whopping 7.2 percent loss), CalPERS has a solid argument for alternative asset investing.

That said, CalPERS, which has identified infrastructure as a coming-of-age asset class, has not followed through fully on that pronouncement as yet.

The retirement system has allocated $5 billion to infrastructure, but to date has invested a little more than $1 billion.

Though CalPERS has scouted the market both globally as well as within California, so far it has only a stake in London Gatwick Airport and a project portfolio acquired with First Reserve Corporation to show for its efforts.   

In general, CalPERS, unlike its north-of-the-border pension fund brethren such as the Alberta Investment Management Corporation (AIMCo) or Ontario Teachers Pension Plan (OTPP), has not demonstrated a penchant for bidding – either alone or as part of a consortium – to acquire infrastructure assets.

Still, CalPERS has continued to publicly enthuse about the investment potential of the California market. That was made evident last autumn, when it allocated an extra $800 million to its infrastructure portfolio.

In the Golden State, that faith in infrastructure is echoed by fellow pension heavyweight the California State Teachers' Retirement System (CalSTRS).

In 2012, the $150 billion CalSTRS gave Industry Funds Management, the Australia fund manager, a $500 million mandate to invest in the asset class.