CalPERS Considering Change in Benchmark for Private Equity

CalPERS is considering changing its benchmark for measuring private equity performance, according to a report presented to the pension fund's governing board Bloomberg reports.

Details of Benchmark

CalPERS uses a staff-designed benchmark based on global and U.S. public equity with 300 added basis points.

However, according to Bloomberg, the current benchmark can:

• Encourage risky investments; and
• Measure private equity performance imprecisely.

In the report, Réal Desrochers, senior investment officer in charge of private equity at CalPERS, said the benchmark creates "unintended active risk for the program, as well as for the whole fund."

CalPERS is considering implementing a new benchmark as part of its efforts to reduce risk in its financial portfolio (Marois, Bloomberg, 12/16).

Bill Would Require Pension Funds To Remove Coal Holdings

In related news, Senate President Pro Tempore Kevin de León (D-Los Angeles) on Monday said that he plans to propose a measure that would require two of the state's pension funds -- CalPERS and the California State Teachers' Retirement System -- to divest their holdings in coal, the Sacramento Bee reports.

The legislation comes amid pressure to remove fossil-fuel investments from the pension funds' portfolios. The action largely would be a symbolic move to raise awareness about climate change risks, according to the Bee.

De León expects to submit the plan in January (Siders/Ortiz, Sacramento Bee, 12/15).