CalPERS to Reduce Investment in Stocks

The $168-billion California Public Employees’ Retirement System, the largest U.S. public pension fund, voted to put more money into private equity and real estate and cut its stock holdings. CalPERS, changing its investment mix for the first time in nearly three years, will move from cash and stocks into “alternative investments” such as venture capital and buyout funds in addition to real estate. CalPERS last changed its so-called asset allocation in September 1997. The changes reflect a bet that private equity will yield higher returns than U.S. and international stocks. Fixed-income holdings will be maintained at current levels. The CalPERS board endorsed a staff recommendation that the fund cut U.S. equities by 2 percentage points to 39% of assets and international stocks by 1 percentage point to 19%. It recommended increasing private equity to 6% from 4% and real estate to 8% from 6%. CalPERS’ staff projects U.S. equities will return 9.6% a year in the next decade.