Bloomberg -- Calpers to Boost Commodity Investments Through 2010 (Update3) .......................................
By Saijel Kishan
Feb. 28 (Bloomberg) -- The California Public Employees' Retirement System, the largest U.S. pension fund, may increase its commodities investments 16-fold to $7.2 billion through 2010 as raw materials prices surge to records.
Calpers, which has about $240 billion in assets, agreed at a Feb. 19 board meeting to hold between 0.5 percent and 3 percent of its assets in commodities, spokesman Clark McKinley said. The Sacramento, California-based fund last year put $450 million into commodities, its first such investment.
The agreement is the fruit of Chief Investment Officer Russell Read's efforts since joining in 2006 to boost returns by shifting funds into raw materials and markets such as China and India. Oil has soared above $100 a barrel, wheat breached $13 a bushel for the first time, and gold and platinum climbed to the highest ever since Calpers began investing in commodities.
``We plan on ramping up the program by hiring additional staff,' McKinley said by phone yesterday. ``We are excited about commodities, which have performed exceptionally well for us.'
The fund's commodity investments have so far tracked the Standard & Poor's GSCI index of 24 commodities, which returned 10 percent this year, adding to a 33 percent gain in 2007. In comparison, the Standard & Poor's 500 Index of stocks has fallen 6 percent in 2008, while U.S. Treasuries returned 2 percent, according to Merrill Lynch & Co. indexes.
20 Years of Growth
``Strength in commodity markets will be something we should see generally over the next 10 to 20 years,' Read, 44, said in an interview in April, a year after he moved to Calpers from Deutsche Asset Management. ``The actual importance of the energy and materials sector we believe is going to explode.'
Investors from hedge funds to housewives have been putting their money into commodities such as gold, silver, copper, wheat and energy to help cover losses on stock investments and make up for historically low Treasury yields. Public pension plans in the U.S. hold on average about 81 percent of the funds they need for future retiree benefits, down from 100 percent in 2000, according to a study by Standard & Poor's.
Money managers plan to boost investments in commodities over the next three years, according to a survey by Barclays Capital published in December. About half of the 150 investors surveyed in New York aimed to expand commodities to more than 10 percent of their total assets, up from less than a fifth of respondents in 2005, Barclays said.
Read's Strategy
Calpers, under Read's strategy to change the way it parcels out funds, said in December it planned to switch about 11 percent of its portfolio from stocks and bonds into assets including investments linked to inflation.
The fund, also facing pressure from state and local governments to boost returns, would reduce its fixed-income investments to 19 percent from 26 percent. The yield on the 30- year U.S. Treasury bond last month fell to the lowest since regular sales of the debt began in 1977.
The fund's commodity program will come under the inflation- linked asset class, McKinley said. Calpers will decide on the proportion of assets invested in commodities ``depending on market opportunities,' he added.
Calpers plans to allow its staff to actively manage some of the commodity investments this year, McKinley said.
To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net
Last Updated: February 28, 2008 11:43 EST |
