CalPERS devises plan to repair underperforming absolute-return portfolio
By Randy Diamond | February 20, 2013 4:09 pm
Updated with correction March 14, 2013.
CalPERS needs to adjust the composition of its $5 billion absolute-return strategies portfolio to make its return target of Treasury bills plus 5%, Ed Robertiello, senior portfolio manager, insists.
Mr. Robertiello told the Sacramento-based $253.2 billion California Public Employees' Retirement System's investment committee Tuesday that program changes, including cutting hedge funds-of-funds exposure to 5% of absolute-return assets from 19% while adding a 5% allocation to event-driven strategies, and increasing global macro funds to 10% from 2%, will make it possible to select uncorrelated risks, strategies and managers to meet targets over time.
CalPERS' absolute-return strategies portfolio has missed its target return by about 200 basis points annually since its inception in 2002.
Mr. Robertiello said he plans to present a formal plan to revamp investments in the portfolio for CalPERS' investments committee to consider at its next meeting on March 18.
However, the total size of the CalPERS' ARS portfolio will be determined as part of CalPERS' asset allocation process, which won't be completed until the end of 2013. The process will determine CalPERS' asset allocations for 2014, 2015 and 2016.