With Real Estate Holdings Down, CalPERS' Investments Underperform in 2009

(January 20, 2010) – In 2009, CalPERS’ portfolio earned 11.8% in returns, falling behind its internal benchmark of 21.2%, which is based on the performance of investments similar to what the fund owns. In the last three years, CalPERS has suffered losses in real estate and in private equity investments, putting a strain on California’s giant public pension fund to cover the cost of retirement for 1.6 million state and local government workers, retirees and their families, the Los Angeles Times reported.

The fund’s underperformance was largely based on declining real estate holdings, which plunged 47.5% in 2009 compared to a 15.4% drop for CalPERS’ benchmark index of real estate investment returns. Still, CalPERS’ portfolio rose in value for the year. Its assets increased to $203.3 billion at the end of December, from $183.3 billion, still behind its peak of $253 billion in 2007, according to the Financial News.

The fund’s private equity investments have come under scrutiny recently, with reports that over the last decade, middlemen have been paid $125 million from private investment funds for arranging deals with CalPERS. The intermediaries helped managers secure pieces of the fund giant’s portfolio.
CalPERS has about 54% of its assets in stocks. Most of the remaining assets are in bonds, real estate and private equity investments, according to the Los Angeles Times.