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CalPERS consolidates real assets

The pension fund is changing its benchmark in tandem with eliminating the separate investment segments of real estate, infrastructure and forestland.

The California Public Employees’ Retirement System is getting rid of its separate investment categories in real estate, infrastructure and forestland and consolidating them into a single real assets category, according to materials posted ahead of its April 17 investment committee meeting.

The country’s largest public pension fund said it is making the change because of the similar investment characteristics shared by the three segments; difficulty in acquiring “material representation” in infrastructure and forestland; and desire to foster teamwork among the silos.

“Such consolidation is consistent with the asset class criteria specified in the CalPERS Total Fund Investment Policy,” the pension fund said in its meeting documents.

CalPERS will not change any of its staffing responsibilities within the real assets team, a spokeswoman told PERE.

Currently, real estate comprises 11 percent of CalPERS’ $311 billion portfolio, while forestland and infrastructure make up 1 percent each, according to a presentation. Under the new designation, a single real assets category will comprise 13 percent of the fund.

In addition, CalPERS is changing its current benchmark, the National Council of Real Estate Investment Fiduciaries’ Open-End Diversified Core Equity, to another US core fund index with “virtually identical investment characteristics,” the MSCI Investment Property Databank. The pension fund said it made the change to simplify vendor relationships. The index could also potentially extend to global real estate and infrastructure if those two segments grow large enough to justify inclusion.

During the last fiscal year ended June 30, real estate returned 7.1 percent, while infrastructure generated a 9 percent return and forestland was -9.6 percent, according to the pension system’s annual report. The overall portfolio generated a 0.6 percent return.