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CalPERS cuts private equity allocation to 6 per cent from 7 per cent

CalPERS, the giant US public sector pension fund, has reduced its allocation to private equity to six per cent from seven per cent as part of a broader shift to its portfolio. The $177bn fund stressed its decision should not be interpreted as the start of a withdrawal from the asset class.

The change involves a one per cent increase in both the fund's US and international equity portfolios and a one per cent reduction in its private equity and real estate programs.

'The slight change prevents the fund from paying high transaction costs to continually rebalance its investment portfolio and keeps its performance from diverging too far from its benchmark,' CalPERS said in a statement.

Real estate will now account for eight per cent of the fund's assets, the US stock portfolio some 40 per cent, and the international equity target 20 per cent.

Rob Feckner, chair of the investment committee, said the reduction in exposure to alternatives was a function of their success and not any negativity about the prospect for returns. 'It is a reflection of the success of our real estate and private equity programs to take profits and reallocate assets to other parts of our portfolio,' he said.

There has been speculation that the growing resistance among top tier venture fund managers towards public sector investors and the associated requirements for transparency might force CalPERS to scale back its commitment to the asset class.

Several big public sector investors have already been ejected from funds because they were required to make available information about the fund that would normally be withheld. Some of them may ultimately take the decision that they would rather not invest at all than be forced to commit to second tier managers.

For several years now CalPERS has published bottom line performance information about its private equity fund investments as a result of freedom of information requirements.

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