CalPERS May Boost Hedge Fund Allocation

Hedge funds have been a growing part of governmental investors’ investment portfolios, especially public pension funds. U.S. public pensions are under stress to reach targeted annual returns. Due to a low-yield environment in fixed income and other global economic factors, public pensions have had to take on more risk and increase illiquid investments to target these returns.

News today reveals that California Public Employees’ Retirement System (CalPERS) may increase or maintain current allocation to hedge fund investments next year. This was confirmed by CalPERS CIO Joseph Dear; however, the CalPERS Board will have final say which is due in late spring of 2012.

CalPERS has about a 2% allocation to hedge funds. Hedge funds have been reclassified and put under their absolute-return strategy program. Nearly 60% of its hedge fund investments are made directly through allocation to large hedge fund managers. The other portion is allocated to fund of funds for more geographically focused managers, smaller hedge funds, or emerging managers.

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