The board of the California Public Employees’ Retirement System (Calpers), the largest US pension fund, has voted to up its exposure to private equity and private credit by a combined $34bn in a bet that riskier asset classes will generate higher returns than stocks, according to a report by Bloomberg.
Calpers is increasing it target allocation for private equity to 17% of its portfolio, up from 13% and for private credit, while cutting back on its exposure to publicly listed stocks and bonds.
The new asset mix is the result of a mid-scale investment review at the $490bn pension fund based on “updated market assumptions”, according to Bloomberg.
The report cites a board disclosure document as revealing that the pension fund, which is currently looking for a new Chief Investment Officer following the resignation of Micole Music after less than two years in the role, recently committed nearly $2bn into two private debt funds, Ares European Credit investment VII and Ares Senior Direct Lending Fund III.
Whoever assumes the role will inherit an overall 6.8% investment target return. Calpers recently reduced its expected 20-year return on private equity to about 7.9% due to increased financing costs while increasing expected returns for private credit to 7.2%.
