CalPERS plans to hire AlphaSimplex Group, AQR Capital Management, Pacific Investment Management Co. and Standard Life Investments (USA) to run up to a total of $8 billion in a new multiclass strategic partnership program.
The $245.3 billion California Public Employees' Retirement System, Sacramento, began negotiations with the managers in July, according to documents on its website in conjunction with the Oct. 15 investment committee meeting.
Board members of the pension fund will be asked to adopt a formal investment policy for the new program at the meeting. CalPERS hopes to begin funding the program in November or December depending on the speed of negotiations with the managers, said CalPERS spokesman Joe DeAnda.
Investment staff members expect the managers' combined annualized return target to be at least 7.5%, the same as CalPERS' expected rate of return, with annualized volatility limits of about 12 percentage points.
The program will be funded from all asset classes on a pro-rata basis, and the partners in the program will implement absolute-return rather than relative return-oriented mandates.
CalPERS investment staff said the exchange of investment information from the money managers to CalPERS investment personnel will help the pension fund improve its internal asset allocation procedures and meet its investment goals.
However, Wilshire Associates, CalPERS general consultant, said in a letter contained in the agenda materials that it “remains doubtful” about the potential of “meaningful information transfer” from money managers back to staff for use in the internal allocation procedure.
“We simply have significant reservations about how much actionable information CalPERS will receive from these managers that will make a difference with the rest of the fund,” Wilshire said.