CalPERS To Work New Guiding Principle Into Portfolio Analysis


According to a Pensions & Investments report, CalPERS’ investment staff have begun working a new guiding philosophy into their portfolio analysis: whether a strategy is “repeatable, predictable and scalable”.

The mantra came about when the fund was reviewing its hedge fund portfolio. But Wylie A. Tollette, chief operating investment officer, wants to work the philosophy into the fund’s entire portfolio.

From Pensions & Investments:

Mr. Tollette told the $295.7 billion California Public Employees’ Retirement System’s investment committee that the three principles were used in the determination to end CalPERS’ hedge fund program in September, and will now be used to analyze whether other parts of the portfolio are measuring up to investment return and risk standards.

“We want to apply the same principles to the entire portfolio,” Mr. Tollette said in an interview after making his comments to the board. Mr. Tollette said in the interview no decision has been made to cut any other investment strategy for the CalPERS portfolio, but he did say investment staffers are examining the pension fund’s forestland portfolio and its multiasset-class strategies, among others.

Like CalPERS’ hedge fund portfolio, which made up only 1.1% of the total portfolio, forestland and the multiasset-class strategies are small — forestland made up 0.8% of CalPERS’ portfolio as of Oct. 31, while multasset-class strategies made up 0.4%.

Mr. Tollette said in the interview while hedge funds were cut because it was determined the asset class was not scalable, he said that just because an asset class is small doesn’t mean it doesn’t play a strategic purpose in the CalPERS portfolio. He said the review will be looking at the roles some of CalPERS’ portfolios play in the total risk-return portfolio.

CalPERS managed $295 billion in assets as of September 30, 2014.


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