By J. Haden Werhan
For more than a decade, the California Public Employees’ Retirement System (CalPERS) has invested a modest portion of its plan assets in hedge funds. “Modest” for CalPERS, anyway. As the nation’s largest pension fund, it currently manages nearly $300 billion in assets, approximately $4 billion of which had been allocated to hedge fund investments. The allocation also represents a minuscule drop in the hedge fund market ocean, where investments are measured in the trillions of dollars.
Still, presumably because of CalPERS’ strong reputation among pension plan providers, even small changes in its investment strategy have a way of looming larger than life, in California and nationwide. That’s why we were particularly gratified when CalPERS announced its decision to eliminate all of its hedge fund investments, including 24 hedge funds and six hedge fund-of-funds.