NEW YORK (Reuters) - Calpers, the biggest U.S. public pension fund, is considering dumping asset manager giant BlackRock Inc (BLK.N) as one of its real estate investment advisers, a person familiar with the matter said.
The California Public Employees’ Retirement System is also investigating why two outside pension advisors were managing its $6.8 billion hedge fund portfolio two years after their contracts had lapsed, the Los Angeles Times reported on Wednesday.
Calpers, which has suffered major losses on private equity and real estate during the credit crisis, recently informed BlackRock and other advisers that it was reviewing the relationships and would decide whether to continue or sever ties.
BlackRock, one of the world’s largest money managers and a company that has thrived during the crisis, nonetheless steered Calpers into investing $500 million into Peter Cooper Village and Stuyvesant Town, a sprawling 11,000-apartment Manhattan apartment complex.
That investment, inked near the height of the real estate boom, is now widely considered worthless, the Wall Street Journal said on Wednesday, citing unidentified sources. The housing complex is owned by Tishman Speyer Props LLC and BlackRock.
BlackRock declined to comment on the Calpers review, citing a policy against discussing client activity. Calpers paid BlackRock $12.6 million in real estate advisory fees last year, the Journal said.
The real-estate review began several months ago and could be completed during a meeting next month. Real estate advisers are expected to learn the results of the review in January, said the person briefed on the situation, who was not authorized to speak publicly about it.
Calpers spokesman Brad Pacheco told the Journal the $200 billion pension fund would not “speculate on the future of our real-estate relationships until the review is complete.”
Calpers officials in Sacramento, California, could not be reached for comment.
BlackRock shares were up 0.4 percent at $230 in early trading.
The pension fund voted last week to reduce its exposure to fixed-income investments managed by AllianceBernstein (AB.N) and PIMCO, a unit of Allianz (ALVG.DE). Still, the pension granted one-year contract extensions with the two firms.
In related news, Calpers placed an official who oversees its $5.8 billion of hedge fund stakes on leave, the Los Angeles Times said, citing people briefed on the matter.
The advisers have been working with the pension fund since 2003, but their contracts lapsed two years ago, the newspaper said. Calpers officials found these advisers were paid $36 million.
A Calpers’ spokesman told the paper that it was investigating dealings with outside advisers, but declined to discuss the disciplinary action further.
“We recently discovered that certain Calpers controls and procedures were not followed in the last two years,” Pacheco told the Times.
Reporting by Joe Giannone in New York, Deepti Govind and Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman and Lisa Von Ahn