U.S. Markets

Calpers to reduce equity investments by 7 percent over two years

(Reuters) - The California Public Employees’ Retirement System announced on Monday it will restructure its $300 billion portfolio to invest less in global equity and private equity and more in real assets, inflation and liquidity asset classes.

CalPERS Chief Investment Officer Ted Eliopoulos said the board considered the recent volatility of the market, along with the fund’s 68 percent funding status and negative cash flow, when it made the decision. The changes will take place over the next two years.

The global equity asset class will see the largest change of a 5 percentage point reduction from 51 percent to 46 percent of the overall portfolio. Private equity will be reduced from 10 percent to 8 percent in order to reduce some of the risks in the fund, said Eliopoulos.

Real assets, such as real estate and infrastructure, will be increased by 1 percentage point from 12 percent to 13 percent of the overall portfolio. The inflation and liquidity assets classes will increase by 3 percentage points from 6 percent to 9 percent and 1 percent to 4 percent, respectively.

“The inflation asset class took most of the trading activity to complete those purchases,” said Eliopoulos.

Much of the discussion over why the board had decided to change its investment priorities occurred during a closed meeting earlier this year. Board Member J.J. Jelincic requested minutes from that meeting be released to the public.

“I just think the members really deserve to know the decision we made, why we made the decision. It is their money,” Jelincic said on Monday.

CalPERS, along with most public pension funds across the country, has struggled to achieve their investment goals in recent years. CalPERS returned 0.61 percent last year, compared to its 7.5 percent assumed rate of return.

In November, Eliopoulous said that the fund needed “to be prepared to address a much different policy environment, new economic and investment challenges and opportunities and be ready to adjust, act, and govern ourselves accordingly.”

Reporting by Robin Respaut; Editing by Chizu Nomiyama