CalPERS officials are seriously considering a move to annual asset allocation reviews, in reaction to the continued volatility of financial markets.
The $204 billion Sacramento-based California Public Employees' Retirement System now conducts asset allocation studies every three years, as do most public pension funds.
Fund executives are conducting an internal review on how to become a “more nimble” investment organization, Chief Investment Officer Joseph Dear said in an interview.
Mr. Dear's potential goal: a new asset allocation plan every year. “We have to be more flexible given market volatility,” he said.
At least one other public fund has moved to annual allocation reviews.
The $6.3 billion Arizona Public Safety Personnel Retirement System, Phoenix, has been doing yearly asset allocation reviews since 2007, said James Hacking, its administrator.
Mr. Hacking said the yearly reviews have been necessary because the plan has been diversifying its portfolio away from its former traditional heavy reliance on U.S. equities and corporate bonds. He said the ongoing allocation changes demand the once-a-year reviews.
He said changing market conditions have also been a factor.
“It became a necessity to do more frequent reviews,'' Mr. Hacking said.
CalPERS last did a full asset allocation revision in 2007. It now is in the process of determining what the 2011 through 2013 allocation should look like. But the outcome of that process, scheduled to be decided at the end of this year, could include scrapping the three-year timetable and going to a one-year period, Mr. Dear said.
At a CalPERS investment committee workshop on May 18, Mr. Dear said he was concerned that market conditions are changing so frequently that relying on historical trends to determine asset allocation is not a sure thing.
“If that's the case, then we have to develop a whole new capability of an organization to make judgments about the condition of asset prices,” Mr. Dear said at the workshop, “and to make asset allocation decisions in a much shorter time.”