CalPERS proposed internal fixed-income-based enhanced equity index portfolio could total about $2 billion, Eric Baggesen, senior investment officer for global equity, told investment committee members today.
The new program would use high-quality asset-backed securities as the alpha engine and derivatives meant to replicate the Wilshire 2500 index as the beta. Funding will likely come from internal U.S. equity index assets. Recent dislocations in the fixed-income market have created an attractive opportunity for the portfolio, but the life of the portfolio will likely be two to three years, Mr. Baggesen said. At that point, the portfolio may be wound down.
The investment committee at the $227.7 billion California Public Employees Retirement System, Sacramento, gave staff permission to create a formal proposal to develop the new portfolio, which must be approved by the full board.
Separately, the committee approved an infrastructure investment policy. The asset class is part of the relatively new inflation-linked asset class portfolio, which is up to 5% of CalPERS total investments.