The California Public Employees’ Retirement System this week adopted a new allocation strategy for its $250 billion portfolio, boosting its private equity allocation to 10%. It had previously been set at 6%.
Global publicly-traded stocks, which were 60% of the total portfolio, will move down to 56% and will be evenly split between U.S. stocks and international stocks. Its fixed-income and inflation-linked assets combined will be set at 24% percent, and its real estate asset allocation will be 10%.
The system’s board also set ranges for investing. The pension set a range of +/-3% for its Alternative Investment Management program, +/-5% for total equity, +/-5% for fixed-income and the inflation-linked asset class combined, and +/-3 for real estate. In addition, inflation-linked assets will comprise from 0% to 5% percent of the overall portfolio.
CalPERS investment officers will use the targets to deploy capital over the next two to three years, when the board tentatively is scheduled to again review and revise the allocation mix, based on dynamic market trends.
“These revised allocation markers reflect the promise of our private equity, real estate, and asset-linked investment classes,” said Charles Valdes, chairman of CalPERS investment committee. “By hitting the reset button every few years, we keep our portfolio balanced and diversified in a fluid market that never stands still.”