CalPERS' $62.1 billion factor-weighted equity portfolio is among the steps the pension fund's officials have taken to help mitigate the impact of the decline in the equity markets, CIO Yu "Ben" Meng on Wednesday told the board of the $371 billion pension fund.
"We are also taking advantage of prudent investment opportunities that may arise during this time of extreme market volatility," Mr. Meng said without providing details.
At the same time, Mr. Meng notified the board that due to the fluctuations in the market over the past few weeks, CalPERS' portfolio weights are deviating away from its strategic allocation targets.
"We are monitoring the situation very closely and have a plan in place to address it and will keep you informed," he said.
Due to the COVID-19 pandemic, CalPERS' board meeting Wednesday was held by teleconference. CalPERS postponed its investment and other committee meetings. During the meeting, CEO Marcie Frost said CalPERS' investment functions are being managed remotely.
According to the total fund investment policy for the California Public Employees' Retirement System, Sacramento, if an asset class allocation exceeds the policy range, staff has to return the asset allocation to its policy range "in a timely manner."
CalPERS' current target asset allocation is 50% public equity, including 15% factor-weighted equities; 28% fixed income; 13% real assets; 8% private equity and 1% liquidity.
"We don't have a crystal ball to tell you how long this pandemic will last. There's no clear picture of the impact COVID-19 will have on the economy and the global financial markets," Mr. Meng said. "It is difficult to gauge or forecast, and we should expect market volatility to continue."
The most important things CalPERS can do is to "stay vigilant and carry out our long-term strategy."
In response to a question for board member Lisa Middleton, Mr. Meng said he could not give an expected range of returns for CalPERS' portfolio for the 2020 fiscal year due to the market volatility and the one- to two-quarter lag of the pension fund's alternative investments portfolios.
"As we all know the 7% (return) target is one of substantial financial consequence not just for CalPERS but everyone that contracts with CalPERS," Ms. Middleton said in response.
