(January 4, 2013) – It was a big year for hard assets for the largest public pension fund in the United States.
The $251.5 billion California Public Employees’ Retirement System (CalPERS) gained 9.3% on its real asset portfolio, and plans to invest more next year, according its annual report for the 2011-2012 fiscal year. As of June 30, the fund’s real asset portfolio totaled $4.69 billion. That will climb by at least $800 million in the near future, as CalPERS has committed to investing that amount in California infrastructure over the next three years.
According to Chief Investment Officer Joe Dear, the allocation process is in its early stages. “As part of this effort, we began engaging the California business community to better understand how CalPERS can help,” Dear wrote in his letter in the report. “And we held four roundtable discussions throughout California to explore opportunities for infrastructure investments in energy, water and transportation, as well as the obstacles and challenges to investing in the infrastructure sector.”
This earmark is part of a $5 billion investment strategy in infrastructure that CalPERS’ board approved last year. The strategy is also explicitly attempting to be a role model on behalf of its state. After the plan passed, the investment committee directed staff to “develop a plan for outreach to state and local governments to explore what role CalPERS and other US pension systems can play to facilitate infrastructure investment in California,” according to meeting records.
As of the end of March 2012, CalPERS’ infrastructure program held just six assets, but represented over one billion dollars of pension assets.
Despite the strong plans for and returns on real assets, the nation’s largest public fund only gained 0.1% in the 2012 fiscal year. CalPERS suffered nearly 15% losses on its international equity portfolio—which was still in line with its benchmark.