CalPERS staff by year’s end expects to recommend that the $227.7 billion system cut its 10% target allocation to private equity if the weakened public equity markets don’t recover, according to a memo to the California Public Employees’ Retirement System’s investment committee.
As weak equity markets have decreased the Sacramento-based system’s overall assets under management, the percentage allocated to private equity has increased, according to the memo that will be presented at the Aug. 18 investment committee meeting. Meanwhile, “distributions have slowed considerably while drawdowns on commitments have continued,” resulting in an increase in the ratio of the market value of the private equity assets.
CalPERS currently invests about $25 billion in private equity. The maximum allocation allowed is 13%, three percentage points above the target, but CalPERS’ is likely to surpass that in the “foreseeable future,” the memo notes. More details about the new allocation target were not given.
Separately, staff is recommending the committee renew the contracts of its four external environmental equity managers for one year. AXA Rosenberg, which runs $133.2 million; New Amsterdam Partners, $79.2 million; and SSgA, $78.1 million, are CalPERS’ domestic managers. SSgA also runs a $125.2 million international portfolio and Brandywine Global runs a $78.2 million international portfolio.
Staff and the consultant, Wilshire Associates, are considering tweaking the focus of the environmental equity program to concentrate more on public companies in the renewable energy, recycling, battery production, or carbon sequestration industries, according to a memo from Michael Schlachter, managing director at Wilshire, to Anne Stausboll, interim CIO. The system currently screens out the world’s worst polluters.
Separately, CalPERS’ search for a new CIO is officially under way. Ridgeway Partners is leading the search to replace Russell Read, who left the $227.7 billion California Public Employees’ Retirement System, Sacramento, at the end of June to start a clean-tech private equity firm.
The system’s board is looking for someone with at least seven years of relevant experience, at least an MBA, a strong knowledge of alternative and fundamental asset classes and a “strong grasp of asset allocation as a diversification tool and earnings generator … within the context of strong risk management,” according to the job listing on the pension fund’s website. Interested individuals can contact Ridgeway at [email protected]
