CalPERS staff proposed creating a live internally managed passive currency overlay strategy, initially set at $1 billion. The strategy, approved by the investment committee of the $156 billion California Public Employees Retirement System in October 1999, generated tracking error of only 8 basis points in a paper portfolio from December 2000 through June. The committee will vote on using live money at its Monday meeting.
In a memo to the committee, staff at Sacramento-based CalPERS said running currency overlay internally would help them run international investments more effectively, could lead to restructuring the funds entire currency overlay program and could lead to creation of an active currency program. Cost savings could range from $275,000 to $900,000.