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Alternative Market Briefing

CalPERS new asset allocation mix adds 5% leverage to increase diversification

Tuesday, November 16, 2021

Matthias Knab, Opalesque:

The CalPERS Board of Administration today selected a new asset allocation mix that will guide the 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 decision concludes a nearly yearlong comprehensive review of the pension system’s investment portfolio and actuarial liabilities. Known as the Asset Liability Management process (ALM), the board conducts the evaluation every four years.

“The actions we’ve taken today provide the framework for the long-term success of the CalPERS fund,” said Theresa Taylor, chair of the Investment Committee. “The portfolio we’ve selected incorporates a diverse mix of assets to help us achieve our investment return target of 6.8%. And by adding 5% leverage over time, we’ll better diversify the fund to protect against the impact of a serious drawdown during economic downturns.

“We’ve heard from stakeholders, public agency leaders, and investment experts throughout this year, and I’m proud of the work we did together on behalf of California’s public employees.”

As part of the ALM process, led by CalPERS’ investment, actuarial, and financial offices, the board examined different investment portfolios and their potential impact to the CalPERS fund. Each portfolio presented a different mix of assets and......................

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