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CalPERS charts new course for investment mix

California’s public employees’ pension fund, battered by a roiling stock market and an economic recession, is drawing up a new roadmap for investing its money.

The $180 billion California Public Employees’ Retirement System, which has 1.6 million members, will spend much of the first half of the year putting together its blueprint for what Calpers calls “asset allocation,” in which the pension fund sets targets and goals for various types of investments. The last asset-allocation plan was crafted in November 2007, and the pension fund typically would wait another year before doing it again. But the changes in Wall Street and the economy have speeded up the timetable.

In broad percentages, CalPERS assets currently are distributed among publicly traded stocks (56 percent), private companies and real estate (10 percent), fixed-income products such as bonds and treasury bills (19) percent, and inflation-linked products such as commodities, inflation-linked bonds and forest lands (5 percent).

“Because of the extraordinary market volatility and because the economic situation can have an impact on all our asset allocations, we are going back to the drawing board,” said CalPERS spokesman Clark McKinley. The board will set new percentages for each category, and may reduce its assets in stocks while increasing its participation in bonds and treasury bills, for example.

Members’ pension benefits, protected by law, are not threatened – at least not yet. But CalPERS, the largest public employee pension fund in the nation, has suffered dramatic losses in its investment portfolio. Fifteen months ago, in October 2007, CalPERS’ assets stood at $260.4 billion.

On Monday, Jan. 12, the assets stood at $181.4 billion – a drop of nearly $80 billion – but better than the low recorded by the fund, $172.3 billion, in November, driven largely by stock market declines.

Despite the losses, the good news for CalPERS – and its members – is that the level appears to be hovering in the $180 billion range, or higher. “It’s flat-lined,” McKinley said. The bad news is that continued losses at the fund could require the state to kick in enough money after 2010 to make sure pension benefits are not disturbed.

A check on asset levels from last year and early this year do not show major fluctuation. On October 29, it was $187.4 billion, on Dec. 10, it was $183 billion and on Dec. 30, it was $184.3 billion. On Jan. 5, it was $187.8 billion.  

“This is short-term stuff and we are in for the long haul,” McKinley said, “and eventually when the market recovers we’ll still be here. Nobody knows how long that will take, it could take months, it could take years. But when it does recover, we’ll be in a good position.”

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