The California Public Employees' Retirement System (Calpers), which manages $169 billion in public pension funds, may boost its private-equity investments by around 40 percent as slumping markets create some acquisition bargains.
Calpers' board next week is scheduled to vote on a plan that would increase the fund's target for corporate buyout and venture-capital investments to 14 percent from 10 percent.
Spokesman Clark McKinley said the fund's $22.8 billion of such investments has jumped to 13 percent as the sinking value of stocks and other assets reduced the size of the overall fund.
"This is a great time to make some good deals," the Calpers spokesman said. "When markets are down, it's a good time to buy."
Under the proposed plan, Sacramento-based Calpers would invest 49 percent of its money in stocks, which includes hedge funds, another 19 percent in bonds, 10 percent in real estate and 5 percent in inflation-protected Treasuries.
As a result, stocks and hedge fund investment would slip from 56 percent and fixed-income would creep up one point to 20 percent. All equities, public and private, would shrink 3 percentage points to 63 percent under the new plan.
Calpers executives declined to comment on the new targets, he said.
The meeting agenda sent to Calpers board members observed that consulting firm Wilshire Associates had recommended a 15 percent allocation to private equity, but the fund's investment officers trimmed that target by one point.
Calpers for the first time also plans to keep 2 percent of its money in cash, up from its traditional zero cash policy.
There are no plans to change hedge fund allocations, McKinley said.
Actual investments can fall within a certain range of these targets, giving investment officers flexibility, McKinley said. The new ranges are narrower as market volatility subsided, Calpers staff told board members.
Private equity and VC investments could range from 9 percent to 19 percent of the total fund under the new plan.
Calpers sets its investment targets for stocks, debt and other assets every three years, and the current allocation plan expires in December 2010, he said. Calpers said it will do "a more thorough" asset allocation and liability assessment next fall before setting targets for the next three years.