CalPERS OKs Billions Into Multi-Asset Strategic Partnerships

The largest public pension in the US is pursuing an investment policy for a new multiclass strategic partnership program that will invest up to a total of $8 billion with four investment managers.

(October 16, 2012) — The $245.3 billion California Public Employees’ Retirement System’s (CalPERS) investment committee has adopted a formal investment policy for a new multiclass strategic partnership program.

The scheme can allocate up to 3% of the total fund into the relationships with four external managers as per the policy, CalPERS spokesman Joe DeAnda told aiCIO.

CalPERS officials said they hope to start the program in several months pending successful negotiations with the four managers for the program, with negotiations having begun in July. The four managers are AlphaSimplex Group, AQR Capital Management, Pacific Investment Management Co., and Standard Life Investments (USA).

The program has two strategic objectives, each linked to the development of relationships with external investment managers, CalPERS said in a release.

“The program is intended to provide a total rate of return in excess of the CalPERS target rate of return over a market cycle with lower volatility and downside risk than the CalPERS strategic asset allocation,” the scheme stated. “The management of portfolios which, utilizing public market assets such as equities, fixed income, commodities, and currencies, attempt to outperform the CalPERS assumed rate of return with less risk than the total fund.”

Another objective? “The engagement in a strategic partnership with CalPERS to facilitate meaningful information transfer and guidance on the development of scalable, sustainable, and efficient methods of increasing the likelihood of meeting CalPERS investment return goals over the long term,” the release stated.

The pension also stated that the program is designed to identify and invest with managers who have demonstrated the ability to invest across asset classes “to create long-term absolute returns consistent with CalPERS rate of return requirements while effectively managing risk.”

Related article:NJ CIO Tim Walsh on why private equity ‘strategic partnerships’ make sense.