The largest U.S. pension fund was busy at its November meeting, giving investment staff more leeway to invest in private assets.
Other items of note during its three days of meetings: CalPERS CEO Marcie Frost decried the politicization of ESG investing and also said the pension fund is examining its exposure to cryptocurrencies in its private equity portfolio.
CalPERS' investment committee on Nov. 14 changed its investment policy regarding staff investing in private assets, including an increase in the amount certain staff members can invest without board approval.
Nicole Musicco, chief investment officer for the $443.2 billion California Public Employees' Retirement System, Sacramento, said staff needed the changes so the investment team could be "set up to be agile" and responsive to market conditions. Staff wanted to "really make sure we have the appropriate tools in place to execute on the strategic asset allocation that we endeavored starting in July," she said.
Staff members are implementing its new asset allocation amid what she expects to be "continued rocky roads through the next 12 to 18 months," Ms. Musicco said.
Among the changes in the investment policy statement approved Nov. 14 are raises to the CIO's commitment and disposition limits in infrastructure to $6 billion from $2 billion, and the managing investment director's commitment and disposition limit to $2 billion from $1 billion. The policy leaves the CIO and managing investment director's real estate commitment and disposition levels unchanged at $6 billion and $3 billion, respectively.
The revised policy also, for the first time, includes commitment and disposition limits for the deputy CIO at $4.5 billion for real estate and $4 billion for infrastructure. In addition, prudent person opinions are required only for transactions that are greater than $250 million, up from $100 million for both the CIO and managing investment director investment decisions.
The policy also increases the infrastructure portfolio's exposure to international infrastructure to 70% from 60% of the portfolio's net asset value and reduces its allowable exposure to U.S. infrastructure to 30% from 40%.
In private equity, the revised policy increases staff's delegated authority size for funds, customized investment accounts, co-investments and secondary purchases. The CIO can now commit $4 billion to a customized investment account, up from $1.9 billion; $3 billion to a fund, up from $1 billion; $3 billion for secondary market purchases, up from $1.7 billion; and $1.5 billion for a co-investment, up from $600 million. The investment committee added a new category, secondary sales, with limits of $6 billion for the CIO, $4 billion for the deputy CIO and $2 billion for the managing investment director.
The investment policy also increases the aggregate commitment size to a single general partner to 15% from 10% of its total net committed capital to private equity. Any exceptions must be approved by the investment committee. In 2014, the committee increased approved exceptions, increasing the aggregate amount to 15% for three managers, Blackstone Inc., Carlyle Group Inc. and Apollo Global Management Inc. CalPERS had $72.3 billion in real assets and $48.8 billion in private equity as of Sept. 30.
Staff will keep the committee "up to speed" on its investments and get the committee's feedback, Ms. Musicco said.
"We don't want anyone to be surprised on anything we are doing, and we need the board's full support on some of the needle-moving transactions we are looking at," Ms. Musicco added.
She said more details would be provided in closed session.