CalPERS' investment committee on Monday approved a five-year plan for the $237.5 billion retirement system's emerging manager program to better gauge its performance.
CalPERS has about $10 billion invested with 300 emerging managers, and performance of managers in the program has been mixed, according to the plan.
Statistics provided by CalPERS show that for the past five years, global equity was the only asset group in which emerging managers beat the investment returns of the fund's non-emerging managers. Emerging global equity managers had an annualized return of -0.3% as of June 30 compared to -2.57% for all CalPERS global equity managers.
In private equity, emerging managers had an annualized 3.93% return as March 31 compared to 7.24% for the total CalPERS asset class; in real estate, as of March 31, emerging managers returned an annualized -15.11% compared to -12.07%; and in absolute return, emerging managers as of June 30 had an annualized -0.89% return compared to 0.25%.
The new five-year plan calls for the California Public Employees' Retirement System, Sacramento, to develop better metrics to determine the reasons for manager underperformance against their asset class peers.
Possible reasons for underperformance cited in the plan are a lack of a structured program and inadequate oversight of inexperienced managers.
The plan does not cite the time period for underperformance, but says the emerging manager program began in 2000, when CalPERS began a management development program for global equities.
CalPERS also detailed in its report that the retirement plan has $3 billion invested with 80 firms owned by women and minorities, accounting for 4% of CalPERS' externally managed assets.