California Public Employees’ Retirement System (CalPERS) has estimated that it will need to commit approximately $5bn (€5.08bn) to new infrastructure investments every year to maintain its new real assets allocation target.
The $440bn pension fund also revealed it has committed $750m to the IFM Global Infrastructure Fund, managed by IFM Investors.
CalPERS made the decision last year to increase its target allocation for real assets from 13% to 15% at the start of the new fiscal year, starting on 1 July 2022.
A breakdown of the real assets allocation target was not disclosed, but according to IPE Real Assets’s top 100 infrastructure investors ranking, CalPERS has $6.1bn in infrastructure exposure, equating to 13.9% of its total assets.
IPE Real Assets also understands that most of the increased real assets allocation will go to real estate investments, followed by infrastructure and a small exposure to forestland.
According to a board meeting document, CalPERS recognises that it will have to invest globally if it is to commit significant volumes of capital to infrastructure strategies, with most transactions tending to take place outside the US.
The $44.2bn IFM Global Infrastructure Fund has less than a third (32.2%) of its investments in US, according to a board meeting report from the Connecticut Retirement Plans and Trust Funds. The balance of its portfolio is Australia (29.3%), Canada (14.2%), UK (10.8%), continental Europe (10.5%) and Asia (3%).
The open-ended has an entry queue of commitments worth about $4bn, with $2bn already earmarked for investments and capital expected to be called over the next six to 12 months. The target net internal rate of return for the fund is 8% to 12%.
Policy changes for CalPERS’s infrastructure allocation will be discussed and approved at the pension fund’s November board meeting.
