California Public Employees’ Retirement System said its infrastructure investments had increased over 12 months from $2.6bn (€2.23bn) to $3.8bn, according to documents prepared ahead of its investment committee meeting next week.
Its infrastructure portfolio outperformed over the 12 months ending 30 June 2017, returning 9.9%. Its benchmark, set at 400bps above the consumer price index, was 6.5%.
The infrastructure portfolio is managed by eight external managers and includes separate accounts, funds and direct investments, each making up roughly one third. Just over half (56%) of the portfolio is made up of US infrastructure investments.
Meketa Investment Group, which took over as infrastructure investment consultant earlier this year, has attributed the outperformance to CalPERS’s core holdings, which represent 70.1% of the portfolio’s net asset value.
Meketa took over after incumbent consultant StepStone resigned from the position for reasons that have not been disclosed.
At the beginning of the year, Todd Lapenna who had been the infrastructure portfolio manager at CalPERS for more than six years, joined StepStone as a partner.
Infrastructure investments represents approximately 1% of CalPERS’s total assets, which were valued at $323bn at the end of June.
Its larger real estate portfolio, valued at $30.5bn, represents 9.4%, below its interim target allocation of 11%. This means CalPERS would need to invest another $5.1bn in real estate to reaches the interim target.
CalPERS has revealed that it has continued to reduce the number of its external real estate investment managers, down from 58 in 2015 to 30 this year – excluding five additions made through its emerging manager progamme.
The real estate portfolio returned 7.6% in the 12 months to 30 June 2017, just beating its benchmark of 7.6%.
The pension fund’s $1.98bn forestland portfolio underperformed, returning 1% verus its 3.6% benchmark.
Overall, its $36.3bn real assets portfolio – combining infrastructure, real estate and forestland – generated a return of 7.4%, narrowly beating its 7% benchmark.