The headline was on a Bloomberg story via Yahoo yesterday.
On October 26, 2008 our headline was:
Calpers Sells Stock Amid Rout to Raise Cash for Obligationswith the one line introduction:
This is hedge fund behavior, selling your most liquid investments to prop up the illiquid....And what brings this ridiculous, and for a fiduciary probably illegal behavior to mind?
FT Alphaville:
Calpers and the ‘illiquidity premium’
In 2019 we took a quick look at some comments by Calpers, the $401bn Californian pension megafund, regarding its private equity book.....MUCH MORE
Chief investment officer Ben Meng was bullish on the asset class, telling the fund’s investment committee that Calpers needed more exposure to PE “and we need it now”.
Meng reiterated the idea to the FT in December, stating that he wants private equity to represent over 10 per cent of Calpers’ assets, up from around 7 per cent today.
Private equity’s runaway success with fund allocators over the past decade has drawn some criticism from those who invest in listed securities -- such as mutual and hedge funds.
One particular point, made by investors such as Verdad Advisers’ Dan Rasmussen, is that private equity returns are fundamentally the same as those for leveraged, mid-cap public equities. The only difference being that volatility in a private equity portfolio, due to the owned businesses having no day-to-day prices, is masked.
This has been seen as an issue as it hides from allocators that their capital is as much at risk in private equity as it is in the public markets. The difference is that they just don’t know it (yet).
But what happens if illiquidity -- the fact you can’t get an instant mark on a private equity portfolio -- was a feature, and not a bug?.....
I say go for it CalPERS, just don't backstop your risk with the taxing power of the state of California, it's various subdivisions, counties and municipalities.
And especially not when you are paying quarter-million dollar per year (and up) pensions.
