CalPERS plans to double its maximum policy exposure to high-yield debt to $4 billion and to seek external managers to handle most of the expanded portfolio while it develops internal expertise in lower quality credits.
Staff and consultant Wilshire Associates recommend that the policy maximum be doubled to 10% of the Sacramento-based California Public Employees Retirement Systems domestic fixed-income assets, adding up to $3.5 billion to CalPERS high-yield debt exposure. The $169 billion pension fund manages only 1.5% of domestic fixed-income assets, or $557 million, in high-yield debt, which is invested only in the higher credit quality segment of the market. All of those assets are managed internally.
A majority of that new allocation would be handed to external high-yield debt managers, which would invest in the full range of credits. Pending approval by the CalPERS investment committee, the fund would issue a questionnaire in May through InvestorForce.com to identify qualified firms; and an RFP would be issued in July. Finals are slated for December, with funding in February.