SACRAMENTO, Calif. (HedgeWorld.com)–Having ramped up its hedge fund investment total to almost US$1 billion in recent months, the California Public Employees’ Retirement System is now proposing to double its allocation to hedge funds.
Through the end of September, the pension system had committed more than US$925 million to hedge funds. By year-end, hedge fund assets will likely reach US$1 billion as CalPERS officials scrutinize two additional funds that would be brought into the stable, according to investment committee documents.
The timeline for the plan to move another US$1 billion into hedge funds, currently laid out as a staff proposal, is unspecified.
In further advancing its position as the largest pension fund allocation to hedge funds, CalPERS must contend with cautionary advice from one of its consultants, Wilshire Associates. The Santa Monica, Calif.-based firm some worries over the new allocation in a memo to Mark Anson.
“While Wilshire supports the Staff’s efforts to date with hedge funds, Wilshire has some concerns about the current hedge fund market environment that we believe should be considered in the face of the new $1 billion allocation recommendation,” Michael Schlachter, managing director of Wilshire wrote.
The US$165 billion pension fund’s investment committee is set to approve the staff proposal on Monday.
Wilshire’s concerns center on large recent inflows into hedge funds and dimmer return expectations for hedge funds than in the past. Earlier this year, Wilshire Senior Managing Director Mike Napoli expressed concerns over the issue of capacity and its ultimate impact on funds of hedge funds (see ).