SACRAMENTO, Calif. — CalPERS' investment policy subcommittee on Aug. 18 is expected to consider a new global real estate policy for the $227.7 billion system that could increase its exposure to emerging markets real estate.
The new policy, if ultimately approved by the investment committee, would allow investments in emerging markets up to 20% of the California Public Employees' Retirement System's $23.6 billion real estate portfolio, according to a draft of the policy to be presented to the subcommittee. As of March 31, about 3.7% of its real estate portfolio was in emerging markets.
The policy would also allow up to 100% of the portfolio to be invested in developed markets and up to 5% in frontier markets. The new policy is a result of a September 2007 review of the real estate portfolio that called for increased exposure to overseas real estate.
The investment committee could consider the new policy at its Sept. 15 meeting, said spokesman Clark McKinley.
CalPERS staff by year's end also might change its target allocation to private equity, now at 10% of assets, if the weakened public equity markets don't recover, according to a memo to the investment committee.
As weak equity markets have decreased the system's overall assets under management, the percentage allocated to private equity has increased, according to the memo that was to 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 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.