(January 13, 2010) — Managers of the California Public Employees’ Retirement System plan on harnessing the fund’s tremendous size to invest in infrastructure.
CalPERS, which has about $200 billion in assets, aims to increase the percentage of its investments in infrastructure. The fund expects to invest between 40% and 70% domestically, and between 20% and 40% outside the US. The fund’s acceptable range of infrastructure investment is up to 3% or $6 billion.
The funding gap for infrastructure in the United States has grown to $2 trillion because government agencies and utilities have been unable to secure funding, said Glenn Ezard, senior consultant with a financial and benefits consulting company, according to Portfolio. While low-risk projects include existing toll roads and water-treatment plants, high-risk infrastructure projects include building projects and merchant power plants.
Portfolio reports the following CalPERS allocations:
- 10% to 40% for existing and operating investments that have cash yield as the dominant part of their return. Expected return: 3% to 5% over CPI.
- 40% to 70% for private value-added investments. Expected return: 5% to 7% over CPI.
- Up to 20% is targeted at private opportunistic investments, e.g. high-risk/high-return investments. Expected return: 8% to 12% over CPI.
- Up to 10% for public-project investments. Expected return: 4% to 6% over CPI.
In December, the fund announced its first lead consultant, Meketa Investment Group, Inc., for its young infrastructure program. As of then, CalPERS had committed about $700 million to infrastructure investments. Besides infrastructure, the other class components are commodities, forestland and inflation-linked bonds.
CalPERS provides retirement benefits to more than 1.6 million state, school and local public employees, retirees and their families.