The California Public Employees’ Retirement System (CalPERS) cut costs by $217 million in the 12 months to the end of June, aided by the high-profile demolition of its hedge fund program.
In CalPERS’ annual report, released yesterday, the $301 billion pension recorded a lower than expected 12-month investment return of 2.4%, but both its three- and five-year returns exceeded targets—the first time this has happened since 2007.
“We have continued to examine the portfolio to ensure its efficient management, and to look for ways to reduce risk, complexity, and costs,” said CIO Ted Eliopoulos. “During the 2014-15 fiscal year this was witnessed by the elimination of CalPERS’ hedge fund program, and through the diligent work to negotiate more favorable terms for CalPERS with our external managers. In the 2014-15 fiscal year we saved $217 million from these and other efforts.”
Eliopoulos added that longer-term numbers suggested “the work undertaken over the past several years to restructure the investment portfolio and reduce costs and complexity is bearing fruit.”
The “elimination” of CalPERS’ $4 billion Absolute Return Strategies (ARS) program in September 2014 was followed by plans to cut the number of private equity managers by two-thirds. At the end of June 2015, ARS accounted for 0.4% of the portfolio according to the annual report—down from 4% at the time the cull was announced.
In November 2015, the pension sold off $3 billion of its real estate portfolio to Blackstone.
Across the entire portfolio, Eliopoulos plans to halve the number of managers and grant bigger mandates over the next five years.