SACRAMENTO, Calif. — Fed up with fragmented measurement and reporting of hedge fund risk, the $187 billion California Public Employees' Retirement System has built what all hedge fund investors have been seeking.
The holdings-based risk measurement system, which took two years of work and a hedge fund services provider committed to investing megabucks in developing and building the system, can accommodate a wide range of hedge fund strategies and provide integrated monthly reporting.
Holdings-based analysis gives CalPERS' alternative investment staff a more complete picture of the value-at-risk within the portfolios of its hedge fund managers, including less liquid securities, especially within credit strategies. The holdings-based system is complementary to a second, proprietary returns-based risk measurement system CalPERS has developed.
Both hedge fund risk platforms are essential components of CalPERS' development of comprehensive, global risk management systems. CalPERS hired International Fund Services, New York, a division of State Street Bank Corp., Boston, in June 2003 to "build a platform from the ground up to cover all hedge strategies," said Kurt Silberstein, portfolio manager-absolute return strategies, who heads CalPERS' hedge fund investment program. To date, CalPERS has invested about $1.2 billion in hedge funds and is committed to developing a multibillion-dollar portfolio. "There is no off-the-shelf risk system available that can adequately assess the risk taken within (our) risk-managed absolute return portfolio," said Mr. Silberstein.