CalPERS Weighs Foray Into Riskier Loan Securities

CalPERS is considering investing in collateralized loan obligations (CLOs), or securities backed by a pool of (sometimes low-grade) corporate loans.

From the Wall Street Journal:

Fixed-income executives for the nation’s largest public pension fund told their investment board committee Monday they want to buy riskier versions of “collateralized loan obligations,” which are securities backed by corporate loans. The plan already invests in triple-A rated slices of these securities.

“We think we have expertise in this area,” said fixed-income head Curtis Ishii. He added: “You get more spread if you take more risk.”

Mr. Ishii did not disclose how much the system, which is known by its abbreviation Calpers, would like to invest in the riskier loan-based securities. The move still needs to be approved by an investment strategy group comprised of the fund’s top investment officers.

Any shift it makes will likely influence others because of its size and history as an early adopter of alternatives to traditional stocks and bonds.

CalPERS announced last week that it is increasing its real estate holdings by 27 percent.

Photo by Stephen Curtin