CalPERS may cut U.S. stock holdings

The California Public Employees’ Retirement System, the largest public pension fund in the country, is contemplating shifting money out of U.S. stocks to make its $250-billion portfolio more global.

One scenario under consideration calls for CalPERS to reduce its U.S. stock position to 23.8% of total assets from 40% of assets, the fund’s investment chief, Russell Read, told the pension plan’s board.

Such a shift would put the fund’s U.S. stock holdings, as a percentage of its total assets, at their lowest level since at least 1984.

“For more than two decades, we’ve had our global equity program dominated by U.S. stocks,” Read told the fund’s governing board. “This made sense for a number of perspectives, including the fact that U.S. stocks represented the bulk of world equity markets. That’s changed, and we believe it’s changed likely on a permanent basis.”

The board, which is looking at ways of generating greater returns to cover growing public worker retirement costs, is holding a two-day meeting with industry experts to review its investment allocations.

The panel is expected to vote on any new targets next month.

CalPERS currently has $99.2 billion in U.S. stocks, $54.8 billion in foreign stocks, $58.7 billion in fixed-income investments, $22 billion in real estate and $15.3 billion in alternative investments such as private equity.

CalPERS returned 19.1% in the year ended June 30, its best gain in a decade, led by foreign stock and private-equity returns. The Standard & Poor’s 500 index earned 17.4% during that period.

The Sacramento-based fund oversees benefits for more than 1.5 million state and local government retirees and their families.