The California Public Employees’ Retirement System (CalPERS) revealed the value of its US housing investments has collapsed 35 percent.
The value of US residential holdings fell from $9.3 billion to $6.1 billion as of 30 June, it revealed in an investment committee agenda. The assets are held in various partnerships with firms including Hearthstone, IHP Capital Partners, McFarlane/Weyerhaeuser Partners, Newland Capital Advisors, Resmark Equity Advisors, and Wells Fargo Reality Advisors.
The hit on value has inevitably led to negative returns for the year on the portfolio. However, CalPERS said current gains on its real estate portfolio overall have offset that. Overall, CalPERS’ real estate investments have made a positive return over three and five years and since the pension fund began investing in the asset class.
Addressing the decline in value of its housing investments, George Diehr, chairman of the Investment Committee, said it reflected the “realities of the market” and accurately depicted readjustments of price and risk.
However, he added there would be no mass sell-off. “We intend to keep the vast majority of our assets and our long term horizon enables us to be patient. If the market values increase over time, we can expect cash flow back and a return on our capital,” he said.
CalPERS also disclosed it has gone 1.8 percent overweight in real estate against its 10 percent target allocation following steep declines in the value of its equities portfolio. However, it is even more overweight in private equity. Its alternative investments programme, which is mainly private equity, is overweight by 4.2 percent against its 9.5 percent target.