California Public Employees' Retirement System staff has recommended the investment committee approve an asset allocation that slightly reduces the system's projected investment returns.
Agenda material for the Feb. 18 meeting shows staffers want the board to pick a portfolio for the three-year period starting July 1 that would produce projected returns of 7.15% in the first 10 years and 7.56% over a 60-year period. That compares to the current returns of 7.25% for the one- to-10-year period and 7.63% for the one-to-60-year period
However, despite the lower return projections, staffers want the board to keep the discount rate at 7.5%.
The portfolio would have a target allocation of 47% to equities, 19% to fixed income, 6% to the inflation-sensitive securities, 12% to private equity, 11% to real estate, 3% to infrastructure and forestland and 2% to liquidity.
From the current allocation, equities are reduced by three percentage points; fixed income, inflation-sensitive securities and real estate all are increased by two percentage points; private equity and liquidity each decrease by two points; while infrastructure and forestland are increased by one percentage point each.
The volatility of returns for the portfolio would range from 11.76% to 12.52% compared to the current 12.45%.