CalPERS sets its sights on California infrastructure

CalPERS investment staff is actively pursuing transactions in California's energy and power sector, and considers the area one of the most viable ways to increase its infrastructure investments in the near term, according to reports released at the $245.3 billion pension fund's investment committee meeting Monday.

The reports by the staff said the California Public Employees' Retirement System, Sacramento, is exploring opportunities in investor-owned utilities, independent power producers and other investments.

CalPERS had allocated $800 million to infrastructure investments in California but has not yet invested any money. Worldwide, CalPERS has invested only $1 billion of the $5 billion it has allocated for the asset class.

Transportation projects in the state are considered another potential area of investments, but another report released Monday by CalPERS' infrastructure consultant, Meketa Investment Group, noted that problems remain with making those commitments. Investing in toll roads, for example, requires investors to assume traffic risk, the consultant noted. It noted the 2010 bankruptcy of State Route 125, a toll road in Southern California, as an example of risks associated with traffic volume.

Two other areas of infrastructure investments are considered higher risk, the staff report noted. It said CalPERS staff had explored investment opportunities in ports, but ”generally speaking, staff considers most ports-related opportunities to be at the higher end of the infrastructure risk-return continuum.”

“Port assets tend to be sensitive to economic activity and to competition from rival goods delivery routes and have a high degree of dependency on downstream goods-movement systems and facilities,” the staff report said.

It also said there were few opportunities in water investments, given that public water agencies generally have strong financial credit ratings and have “abundant access” to tax-exempt financing.