CalPERS' investment portfolio returned 7.1% in the second quarter, below the fund's overall custom benchmark of 13%, the system's investment committee was told today.
Private equity and real estate had the greatest losses, according to Wilshire Consulting's quarterly total fund report to the investment committee of the $194 billion California Public Employees' Retirement System, Sacramento.
CalPERS' private equity investments returned -13.7%, compared to the private equity custom benchmark's return of -3.3%. For real estate, the return was -14% compared to the -3% for the custom benchmark.
Fixed income returned 6.9%, compared to its custom benchmark of 2.6%; global equity (excluding private equity and currency overlay) returned 21.5%, compared to 23.9% for its custom benchmark; and inflation-linked investments returned 3.4%; compared to 1.7% for its custom benchmark.
Michael Schlachter, managing director and principal at Wilshire, told the investment committee that in years past when CalPERS took risks in real estate and private equity, it was ahead of its peers on average. But in a year like last year, “when everything went lockstep in the wrong direction,” those same risks ended up hurting CalPERS.
CalPERS should expect to see more losses ahead for private equity and real estate “as prices catch up to reality,” according to the report.
Separately, CalPERS will appoint a group of investment committee members to make a recommendation for an infrastructure consultant.
The group will choose from four finalists already selected by the system's investment staff from the nine firms that submitted bids. They are Meketa Investment Group, Pension Consulting Alliance, R.V. Kuhns and Wilshire Consulting. The RFP was issued July 8.
The other bids came from Brock Capital Group, Capital Innovations LLC, Cliffwater, Courtland Partners and Investors Diversified Realty.
The full board will vote on an infrastructure consultant based on the group's recommendation; no date for a vote has been set.