REFILE-Calpers invested $450 mln in GSCI before oil rally

Wed Apr 4, 2007 4:28pm EDT

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(Refiles to fix Wilshire story link in paragraph 10)

By Barani Krishnan

NEW YORK, April 4 (Reuters) - Calpers, the biggest U.S. pension fund, said on Wednesday it recently allocated nearly half a billion dollars to an energy-dominated index, just before oil prices began a rally.

The California Public Employees Retirement System, which manages around $230 billion worth of assets, made its first foray into commodities in March through the Goldman Sachs Commodity Index, Calpers information officer Clark McKinley said.

"We've allocated $450 million to the GSCI in a fully collateralized swap," McKinley told Reuters. "We bought at lower levels than are trading today. We can't really say more than that."

U.S. crude CLc1 hit six-month highs of $68.09 a barrel on March 27, gaining 21 percent on the week as tensions between Iran and the West escalated and as gasoline demand spiked before the start of the U.S. spring and summer driving seasons.

The GSCI .GTX tracks 24 commodity futures, but the energy complex accounts for almost 70 percent of its weighting.

McKinley said Calpers' investment in the index was likely to stay in place until the fund's trustees meet in November to decide on the next move for its new asset class on Inflation-Linked Investments -- which include commodities, inflation-linked bonds, infrastructure and timber projects.

In an e-mail to Reuters, Calpers said it has set a long-run return target of 3 to 7 percent in excess of inflation for commodities under the new asset class.

For inflation-linked bonds, the target is inflation plus 1-2 percent, with annualized risk of 5 percent. For timber projects, the target is 15 percent in annualized returns. No goals have been specified for investments in infrastructure.

McKinley said Calpers was also working on hiring a portfolio manager for the new asset class.

The fund in February named Wilshire Associates as a potential candidate for the job [ID:nN14437615].

"That hasn't happened as yet," McKinley said, referring to the hiring. "Not a whole lot is going to happen within the next few months, it's like watching an iceberg, really."

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