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CalPERS increases investment manager discretion in real assets

Key members of staff can now make larger forestry investments without committee approval.

CalPERS has raised the threshold for its managing investment director and chief investment officer to invest in forestry without committee approval from $0.25 billion to $1 billion and $0.5 billion to $2 billion, respectively.

Similar changes have been made across real assets, including in real estate and infrastructure.

Under the updated guidelines, the limits on discretionary commitments by senior investment officers will more than double across CalPERS’ $32.38 billion real assets portfolio.

In real estate, the limit on commitments by the managing investment director and CIO has been doubled to $3 billion and $6 billion. For infrastructure, the limits were also doubled to $1 billion and $2 billion respectively.

Differences in limits on new versus existing commitments and debt investments have been eliminated.

The moves are described in the fund documents as part of a broader effort to reduce complexity and improve transparency in the pension’s investment strategy.

Managers are still required to mitigate risk by maintaining “an appropriate level of diversification”, and the fund has outlined geographical limits for each sector.

In forestry, at least 50 percent of forestry investments must be made in the US, while up to 50 percent can be made in international developed markets. Up to 15 percent can be made in emerging markets and up to 5 percent in international frontier markets.

A CalPERS information officer told Agri Investor that the changes would not affect the fund’s total real assets allocation.

“It’s important to note that allocations for Real Asset programmes have not been changed,” the spokesperson wrote in an email. “Investing by staff still follows existing strategy and the allocation policy targets set out by the Board.”

Some public pensions are seeking ways to lower hurdles that can hamper deal execution, particularly in areas like co-investments. Howard Kaplan, president of Farmvest, recently told Agri Investor cumbersome approval processes limited the ability of many institutional LPs to take advantage of co-investment opportunities.

New Mexico Education Retirement Board senior portfolio manager of real assets, Mark Canavan, has also told Agri Investor that the capacity to make discretionary deals is important for improving dealflow.

The fund has $307.01 billion of assets under management, according to PEI Data & Analytics.