UNITED STATES - California Public Employees Retirement System has approved a temporary new allocation range for real estate, and selected consultants for both timberland and infrastructure investing.
The $182.2bn (€132.5bn) fund’s policy investment range for real estate has for the time being been expanded from +/- 3% to +/-5% as this would allow pension fund officials to go out into the market and investing more capital.
Pension fund sources say this will allow the fund more flexibility to hold on to the assets it already has, instead of being forced to sell during a depressed investment market.
The new allocation is not permanent as CalPERS is planning to conduct a new asset allocation study in early 2009, to ascertain the status of its asset classes.
The fund’s real estate portfolio was valued at $21.8bn by the end of Q3 2008 and amounted to 10.2% of the pension fund’s $213.5bn it total assets at that time.
At the same time, it has also hired 14 consultants to assist with its search for infrastructure and forestry investments.
The infrastructure consultants are:
Brock Capital Group Capital Innovations, Cliffwater Courtland Partners Investors Diversified Realty KPC Consulting Group Magellan Asset Management Meketa Investment Group Pension Consulting Alliance R.V. Kuhns & Associates and Wilshire Associates.
CalPERS has plans to invests up to 3% of its total plan assets in infrastructure through a combination of commingled funds and separate account relationships.
And the forestry consultants are Cortex Consultants, James W. Sewall Company and ORG Portfolio Management.
CalPERS has also made a related real estate move and hired Stockbridge Real Estate Funds to advise whether it should continue to invest in five funds it currently holds.
One of those funds is Phoenix Realty Group’s San Diego Smart Growth Fund - providing mezzanine or equity financing for infill affordable residential housing, office and retail properties - to which CalPERS made a $60m commitment in July 2005 in return for a 66.7% shareholding.
This investment was valued at $12.6m to CalPERS in June this year but its nominal return after fees was -26.7% in Q1 2008, then 27.1% in one-year and -11.6% since inception.
Another being reviewed is a $100m commitment to Page Mill Properties II made in July 2006, a value enhanced core and challenged core fund which also had development assets in 11 US technology-driven markets but for which only $75m has been called.
At the end of June 2008 this investments was said to be valued at at $69.9m but had seen a nominal return after fees of -3.5% in Q1 and a one-year return of -19%.