CalPERS’ India exposure rose 34% to $1.7B in FY14; global PE allocation shrinks

The California Public Employees' Retirement System (CalPERS), one of the top public pension funds in the US, saw its exposure to assets linked to Indian currency rise by over a third to $1.7 billion in the fiscal ended on June 30, 2014 as compared to $1.27 billion in the year ago period, according to the annual financial report of the company.

Almost all of this was due to changes in fair value of assets in the equity securities bucket from $885 million to $1.3 billion. The value of the real assets, representing primarily real estate assets, shrunk marginally.

This data represent investment securities of all CalPERS managed funds, including derivative instruments that are subject to Indian rupee foreign currency risk.

It did not list any quantum against PE assets in India and it could not be ascertained if this is due to its forex hedging over dollar denominated offshore funds or it has actually disassociated itself with India-focused PE funds.

But CalPERS does counts itself as an investor in several global PE funds investing in India including some in their regional funds. These include Blackstone, KKR, Carlyle, TPG, Clearstone, SAIF Partners, etc.

The pension fund manager which counts realty PE as separate from sector agnostic PE, has listed India-focused realty funds such as IL&FS India Realty Fund, Sun-Apollo India Real Estate Fund and Xander's Indian realty fund among those to which it paid investment management fees, counting them as part of its LP portfolio. Separately, it also listed several institutional equities firms to whom it paid fees for managing its equity investments in India.

In India, CalPERS has held significant equity holdings in large and mid-sized Indian companies operating in sectors including banks, oil, FMCG, pharma and engineering.

Meanwhile, CalPERS, which provides a variety of retirement and health benefit programmes and services, seems to be pruning its asset allocation to private equity space (not counting realty PE funds).

In FY14 PE asset allocation declined to 10.5 of the total as against 12.4 per cent in the year-ago period. Indeed, both are much less than its targeted allocation for PE pegged at around 15 per cent, the report showed.

As of June 30, 2014, CalPERS managed the largest public pension fund in the US, with worth around $301 billion in assets.

Earlier in March last year, CalPERS announced an allocation of an additional $200 million to its emerging manager programme in the PE asset class, which is to be deployed over four years and is in addition to a $100 million commitment made in 2012.

In 2012, CalPERS adopted the Emerging Manager Five-Year Plan – Pathway to the Future (the Plan), which gives a strategic framework to guide CalPERS’ investments and engagement with emerging investment managers.

CalPERS has been investing with emerging managers directly and through fund of funds for more than 20 years.

Holland's APG and Canada's CPPIB are two other international pension fund managers which have been building their India portfolio pretty aggressively over the last couple of years.

(Edited by Joby Puthuparampil Johnson)

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