Calpers eyes raising investment to hedge funds-CIO

Date: Tuesday, March 20, 2007
Author: Reuters

WASHINGTON, March 19 (Reuters) - The California Public Employees Retirement System, already a large investor in hedge funds, will likely raise its allocation to these loosely regulated portfolios in the next three years, a top official said on Monday.

"We expect to increase both the dollar amount and the percentage of our assets that we invest in hedge funds," Russell Read, chief investment officer at the $232 billion fund known as Calpers, told Reuters at a conference.

Calpers was among the first U.S. pension funds to put money into hedge funds and its investment helped prompt a number of other pension funds to jump into an area once reserved mostly for wealthy individuals.

Hedge funds often promise to deliver positive returns in all markets and have become popular with funds to cut volatility in portfolios, but they are also heavily criticized for charging high fees and making potentially risky investments.Calpers currently invests roughly $4.5 billion, or roughly 2 percent, of its assets in the $1.4 trillion hedge fund fund industry, putting the money into 22 hedge funds directly as well as investing through six so-called funds of hedge funds that put together portfolios of hedge funds to reduce the risk for investors.

Calpers plans to soon raise the number of funds of hedge funds it uses to nine, the fund said earlier.

As with all pension fund investments, the fund's board needs to approve any allocation, Read said, stressing that further investments are planned but not yet definite.

Currently Calpers has money with funds of funds groups like PAAMCO and direct investments with hedge funds like Farallon. "There is no fixed target," Read said when asked about how many new managers Calpers might want to put money with.

Last year Calpers earned roughly a 13 percent return, net of fees, on its hedge fund investments.