The largest US pension fund was busy at its November meeting, giving investment staff more leeway to invest in private assets.
Other things to note during its three days of meetings: CalPERS CEO Marcie Frost decried the politicization of ESG investing and also said the pension fund is reviewing its exposure to cryptocurrencies in its portfolio of capital investment.
The CalPERS Investment Committee on Nov. 14 changed its investment policy regarding staff investing in private assets, including an increase in the amount certain staff can invest without board approval.
Nicole Musicco, chief investment officer for the $443.2 billion California Public Employees Retirement System, Sacramento, said staff needed changes so the investment team could be “set up to be nimble” and responsive to market conditions. Staff wanted to “really make sure we had the right tools to execute the strategic asset allocation that we undertook starting in July,” she said.
Staff members are implementing its new asset allocation amid what it expects to be “continuous bumpy roads over the next 12 to 18 months,” Ms Musicco said.
Among the changes to the investment policy statement approved on Nov. 14 are increases to the IOC’s commitment and disposition limits in infrastructure to $6 billion from $2 billion, and the limit of commitment and disposal of the Chief Investment Officer to $2 billion instead of $1 billion. The policy leaves the commitment and alienation levels for the CIO and the managing director of real estate investments unchanged at $6 billion and $3 billion, respectively.
The revised policy also includes, for the first time, commitment and disposition limits for the Deputy CIO at $4.5 billion for real estate and $4 billion for infrastructure. Additionally, prudent person opinions are only required for transactions over $250 million, compared to $100 million for CIO and CIO investment decisions.
The policy also increases the infrastructure portfolio’s exposure to international infrastructure from 60% to 70% of the portfolio’s net asset value and reduces its permitted exposure to US infrastructure from 40% to 30%.
In private equity, the revised policy increases the size of powers delegated to staff for funds, personalized investment accounts, co-investments and secondary purchases. CIO can now commit $4 billion to a personalized investment account, up from $1.9 billion previously; $3 billion to a fund, up from $1 billion previously; $3 billion for secondary market purchases, up from $1.7 billion previously; and $1.5 billion for a co-investment, up from $600 million previously. The investment committee added a new category, secondary sales, with limits of $6 billion for the CIO, $4 billion for the deputy CIO and $2 billion for the chief investment officer.
The investment policy also increases the overall size of commitment to a single general partner to 15%, from 10% of its total net committed capital to private equity. Any exceptions must be approved by the Investment Committee. In 2014, the committee increased the exceptions approved, increasing the total amount to 15% for three managers, Blackstone Inc., Carlyle Group Inc., and Apollo Global Management Inc. CalPERS had $72.3 billion in actual assets and 48 $.8 billion in private equity in September. 30.
Staff will keep the committee “informed” of its investments and get feedback from the committee, Ms Musicco said.
“We don’t want anyone to be surprised at what we’re doing, and we need the full support of the board for some of the needle-moving transactions we’re considering,” Ms. Musicco added.
She said more details would be provided behind closed doors.