CalPERS playbook will create new silver linings

NEW YORK, Nov 16 (Reuters Breakingviews) - CalPERS’ mission is to ensure a comfortable retirement for its 2 million members. In doing so, it will help elite financiers enjoy the high life into their dotage too.

The California Public Employees’ Retirement System voted on Monday to juice up its $495 billion of assets, adding more private equity investments and a shade more leverage. The shift is pretty mild: CalPERS is only planning to borrow the equivalent of 5% of its assets, where in theory it can go to 20%. Former investment chief Ben Meng flagged last year that the fund may need to add more private equity-style investments to the pot to keep returns up to scratch.

Higher returns, though, come with higher fees. CalPERS isn’t the only one allocating more funds to alternative investment managers like Blackstone(BX.N), which extract generous payouts for their services. Blackstone’s annualized management and advisory revenue rose 24% in the last reported quarter. Rival KKR’s(KKR.N) increased by 42%. California’s public-sector employees may benefit from CalPERS’ new approach to risk, but some private-sector folks will make out nicely too. (By John Foley)

Register now for FREE unlimited access to

On Twitter

Capital Calls - More concise insights on global finance:

New York divorce reunites priciest art with buyers read more

Swiss join Europe’s SPAC ride in slow lane read more

Jamie Dimon’s Hong Kong trip cuts both ways read more

Cosmetics M&A at a cruelty-free price read more

Philips sleep disorder faces a mounting bill read more

Register now for FREE unlimited access to
Editing by Swaha Pattanaik and Sharon Lam

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.