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Special Report

CalPERs puts its forestland portfolio up for review

Performance is part of the reason behind CalPERS' review of the role forestland plays in the $323.6 billion pension fund's portfolio.

The nearly $2 billion forestland portfolio of the California Public Employees' Retirement System, Sacramento, earned a net return of 1% for the year ended March 31, according to a July preliminary report.

By comparison, CalPERS' infrastructure portfolio earned a net return of 9.9% and its real estate portfolio earned a net return of 7.6% for the 12 months ended March 31.

CalPERS officials are re-examining the role of forestland in its portfolio as part of an asset-liability study, and restructuring its domestic forestland portfolio.

The domestic forestland portfolio has underperformed its benchmark, while its international forestland portfolio has outperformed since Oct. 1, 2007, said a separate report released in April that used March 31, 2016, data.

But performance is not the only issue.

The April report also noted it is challenging to scale a forestland portfolio "at a meaningful level for CalPERS."

It could take the pension fund five or more years to secure a 1% allocation to forestland and 11 or more years to get to a 2% allocation, the report stated. With a 2% allocation, CalPERS investment would amount to about $6 billion and would comprise 6.7% of the global timberland market.

Megan White, CalPERS spokeswoman, declined comment on CalPERS' restructuring of its domestic forestland portfolio.