CalPERS staff recommended fine-tuning the $177.8 billion pension fund's asset mix to bring it in line with its actual holdings. Staff for the California Public Employees' Retirement System, Sacramento, recommended reducing the real estate equity target to 8% of total assets from 9%, but expanding the range to 4% to 12%, from 7% to 11%. Staff members expect more opportunities to sell real assets than buying in the current market, which could result in the actual allocation shrinking to 6% or less from 7.1% now.
Similarly, staff recommended trimming the alternative investment allocation to 6% from 7%, but shifting the range to 3% to 9%, from 5% to 9% currently. Alternatives now are 5.1% of total assets and may slip if the pension fund continues growing. To offset the reductions, U.S. equities would increase to 40% from 39% and international equities to 20% from 19%.
Consultant Wilshire Associates generally concurred with the analysis but said the proposed real estate range was too wide; it recommended a range of 5% to 11%. The CalPERS investment committee will consider the issue on Dec. 13.
Separately, the system may press the automotive industry on potential plans to block California's new auto emissions standards. On Dec. 7, the Washington-based Alliance of Automobile Manufacturers, which comprises nine major auto manufacturers, joined a lawsuit filed by California automobile dealers challenging new state requirements requiring a 30% reduction in greenhouse gases by 2016. A draft letter from CalPERS to major automakers will ask each company's view on reducing emissions and a detailed explanation on how a litigation strategy would benefit long-term stockholders.
CalPERS will take up the matter on Dec. 13. The issue was spearheaded by California Controller Steve Westly and CalPERS President Sean Harrigan. Mr. Westly also raised the issue with the $118.7 billion California State Teachers' Retirement System, Sacramento.
