CalPERS staff proposed starting a $100 million internally managed active currency overlay program. Staff has discussed creating such a program for two years but is finally seeking approval from the board of the $210 billion California Public Employees' Retirement System, Sacramento. The source of the funding has not been determined, said Eric Busay, portfolio manager, global fixed income.
Staff currently manages a $3.1 billion passive overlay strategy that has added 43 basis points from trading since it started in 2001. Another $7.6 billion is managed by external currency managers. The idea would be to exploit short-term inefficiencies in currency markets created by central banks, hedgers and others exchanging currencies for non-investment reasons.
Staff is developing four active quantitative management models, based on fundamental, technical, interest rate and dynamic hedging strategies. Wilshire Associates endorsed the proposal.
Separately, CalPERS committed $45 million to Lombard Asia III, a $153.5 million private equity fund focusing on non-controlling stakes in the Asia Pacific region (ex-Japan). CalPERS also committed $23.8 million to ITU Ventures III, a $160 million seed capital and early-stage venture capital firm investing in technology businesses.