CalPERS Board Selects New Asset Allocation for Investment Portfolio and Adding Leverage
Posted on 11/18/2021
The California Public Employees Retirement System (CalPERS) Board of Administration selected a new asset allocation model that will guide the pension fund’s investment portfolio for the next four years, while at the same time retaining the current 6.8% target it assumes those investments will earn over the long term. The board also approved adding 5% leverage to increase diversification. The CalPERS board selected the portfolio with expected volatility of 12.1% and a return of 6.8%. The discount rate has been at 6.8% since July, when a strong double-digit fiscal year investment return automatically triggered a reduction under the Funding Risk Mitigation Policy. CalPERS has US$ 495.3 billion in assets under management.
The portfolio includes a 5% allocation to leverage. The usage of borrowed money and the increase of alternative assets are being used to help CalPERS meet is return target. The new asset allocation takes effect July 1, 2022.
| New Asset Mix | Current Asset Mix | |
|---|---|---|
| 42% | Global Equity | 50% |
| 30% | Fixed Income | 28% |
| 15% | Real Assets | 13% |
| 13% | Private Equity | 8% |
| 5% | Private Debt* | 0% |
| 0% | Liquidity | 1% |