CalPERS Sells $3 Billion in Real Estate to Blackstone

The writing has been on the wall: since early Summer, Pension360 has covered CalPERS’ efforts to scale back its real estate exposure in a big way.

On Thursday, the country’s largest pension fund sold $3 billion worth of real estate to the Blackstone Group – an sale which amounts to 10 percent of CalPERS’ real estate holdings.

More from the Sacramento Bee:

The California Public Employees’ Retirement System has been working for years to remove speculative undeveloped holdings from its real estate portfolio and focus more on commercial buildings and other properties that are already developed and producing income.

“This sale allows CalPERS to focus on our strategic plan and on investing in assets and managers that better align with our real estate goals,” said Paul Mouchakkaa, the pension fund’s managing investment director for real assets, in a prepared statement.

CalPERS put the assets up for sale in June.

[…]

Selling to Blackstone also helps with another strategic goal: reducing the number of outside investment managers with which CalPERS does business. CalPERS hopes to save money by having relationships with fewer managers; the pension fund spent $1.6 billion on fees to outside managers in 2014.

The sale comes as the $293.7 billion fund wrestles with a broader effort to reduce investment risks. The pension fund is considering a plan to lower its “discount rate,” which is a target for annual investment profits. A lower rate translates into fewer risks, although lower investment gains would likely lead to higher pension contributions from state and local governments and public employees.

As the Bee notes in its final paragraph, CalPERS is indeed beginning a years-long shift to a more conservative investing strategy.

Photo by  thinkpanama via Flickr CC License