Calpers increases hedge fund exposure to $4 billion

Sacramento-based California Public Employees’ Retirement System (Calpers) has announced plans to increase the size of its hedge fund investments to as much as $4 billion by the end of this year.

The move to increase Calpers’s exposure to hedge funds, which totalled $3.6 billion as of October 3 this year, will also extend the fund’s direct investment in the hedge fund sector – to date, it has invested heavily in the sector through funds of hedge funds.

Calpers, which oversees a $220 billion retirement scheme, would not reveal the specific investments that make up the fund’s direct exposure to the hedge fund sector.

Clark McKinley, California-based information officer at Calpers, told RiskNews: “At this time, our hedge fund staff prefers not to comment on our future plans for the program.”

Calpers launched its hedge fund program, Calpers Risk Managed Absolute Return Strategies (RMARS), in April 2002. The largest portion of Calpers’ exposure to hedge funds consists of four funds of funds, which have a total market value of $2.8 billion: Ermitage European Fund of Funds, KBC Asian Fund of Funds, SPARX Asian Fund of Funds and Vision Asian Fund of Funds.

Calpers states on its website: “The program is explicitly constrained to have no more risk than half that of the US equity market, that is, risk no greater than 50% of the risk of the S&P 500. The program return goal is equivalent to one-year Treasury bills +5%, while taking limited risk.”

The hedge fund portfolio is monitored by investment staff at Calpers, along with California-based institutional money manager, Pacific Alternative Asset Management Company (Paamco) and Switzerland-based bank UBS.