Calpers boosts property investments as hedge funds shrink

Pension fund began restructuring real estate portfolio in 2010; has 11% target allocation for FY16.
SEP 16, 2014
The California Public Employees' Retirement System, the biggest U.S. fund, is increasing investments in real estate by about $6 billion within a year as it begins to exit hedge funds. The $295 billion fund had 8.7% in real estate as of July 31. Since then, the allocation has risen to 9.9%, and the fund has set a target of 11% in fiscal 2016, according to documents posted on its website. (Related: Is Calpers' move away from hedge funds a bellwether for advisers?) The move is separate from Calpers' decision last month to pull all $4 billion it had invested in hedge funds, saying they were too complex and too expensive. The divestiture will take about a year and the board hadn't decided what to do with the money, Chief Investment Officer Ted Eliopoulos said at the time. Calpers began restructuring its real estate portfolio after suffering a 37% loss in 2010, when it wrote off speculative residential investments as property values slumped. As part of the overhaul, the fund has focused on core income investments such as rental apartments, industrial parks, offices and retail space. The shift will mean an increase in commercial real-estate investments by 27%, the Wall Street Journal reported. Mr. Eliopoulos was named chief investment officer last month after the death of Joe Dear. Mr. Eliopoulos had been the director of the fund's real estate division.

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