CalPERS To Cut $4B in Hedge Fund Investments Over Next 12 Months

On Monday, CalPERS announced plans to sell about $4 billion in hedge fund investments over the next 12 months, the Los Angeles Times reports.

The pension fund will cut its stakes in 24 hedge funds and six "mega-hedge" funds, according to the Los Angeles Times.

Details of Decision

Ted Eliopoulos, interim chief investment officer at the pension fund, said hedge funds "are a viable strategy" for some groups, but they no longer fit into CalPERS' investment strategy (Lifsher, Los Angeles Times, 9/15).

Joe DeAnda, a CalPERS spokesperson, said the pension fund would have to expand its hedge fund investments to 10% or more of its portfolio -- up from the current 1.3% -- in order to see better returns, and doing so is not feasible (Stevenson/Corkery, "DealB%k," New York Times, 9/15).

The CalPERS board of directors informally supported the plan, according to spokesperson Brad Pacheco (Los Angeles Times, 9/15).

Reaction

According to the New York Times' "DealB%k," the pension fund's decision likely will "reverberate across the investment community" in the U.S.

Charles Gradanta -- managing principal of Hennessee Group, a hedge fund advisory firm -- said he was "shocked" at CalPERS' decision, adding, "Hedge funds are the place to be now because people are expecting a major correction. You're looking at a very bumpy stock market over the next five years and that is where hedge funds will prove their mettle."

However, other investors were less concerned about the change. Anthony Scaramucci, founder and co-managing partner at global asset management firm SkyBridge Capital, said the move is "an admission by CalPERS that they don't have the right staff or the right managers" ("DealB%k," New York Times, 9/15).

CalPERS Open Enrollment Begins

Meanwhile, CalPERS on Monday also launched its annual four-week open enrollment period for coverage beginning on Jan. 1, 2015, the Sacramento Business Journal reports. The enrollment period will end Oct. 10 (Robertson, Sacramento Business Journal, 9/15).

The pension fund is the second-biggest purchaser of health care after the federal government, according to the Sacramento Bee's "The State Worker."

Depending on location, enrollees can choose from:

Six health maintenance organizations; and
Three preferred provider organizations (Ortiz, "The State Worker," Sacramento Bee, 9/15).

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