The California Public Employees' Retirement System, Sacramento, revamped its $2.1 billion hedge fund portfolio over the last 18 months to make it less directional and more diversified. The $200.2 billion fund also increased the target allocation range for hedge funds significantly, to as much as 5% of the plan's global equities portfolio.
The changes in CalPERS' hedge fund investments are the result of a systematic analysis of the plan's risk-managed absolute return strategy, began by Christianna Wood, senior investment officer-global equities, when she joined CalPERS in June 2002. When Kurt Silberstein, portfolio manager-absolute return strategies, took over the program in January 2003, 70% of the system's assets were invested with U.S. long-short equity managers; that's been reduced to 30%, he said. The program now includes eight specific hedge fund strategies, Mr. Silberstein said: domestic equity long-short; international equity long-short; event-driven; multistrategy; distressed debt; fixed-income arbitrage; market neutral; and credit-driven.
CalPERS' staff will hire hedge funds-of-funds managers for non-U.S. investments next year, Ms. Wood said. Several firms have been identified for consideration, and the fund will select three firms in Asia and four to five in Europe and the U.K. to provide customized funds.