CalPERS To Rely On Hedge Funds To Boost Returns

Sep 30 2011 | 10:47am ET

The nation's largest public pension fund is having trouble hitting its return target—and it's looking to alternative investments to help close the gap.

Joseph Dear, the chief investment officer of the California Public Employees' Retirement System, told The Wall Street Journal that "it may be hard to hit" its 7.75% return target in the "short term," due to the "low return environment with a lot of downside risk."

But unlike some of its public pension peers, CalPERS isn't going to lower that target. And it plans to rely more heavily on hedge funds and other alternative investments to boost returns hurt by stock market losses and low fixed-income returns.

Despite the short-term difficulties, Dear said that CalPERS is confident over the long run. "Over a 20-year time frame, a 7.75% investment return objective is obtainable."

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