California Public Employees’ Retirement System (CalPERS), America’s largest pension fund with an over $600 million (Rs 2,400 crore) exposure in Indian equities, remains confident of the market’s long-term growth prospects, as India remains a ‘key target’, along with other BRICs.
This should, somewhat, sooth nerves of Indian investors who have, cumulatively, lost over $500 billion (Rs 20 lakh crore) to the market meltdown in the first three months of 2008.
CalPERS which managed a global portfolio of stocks, bonds, funds, private equity and real estate worth $255 billion in October 2007, has seen its own portfolio shrink by about $19 billion in value, till date.
CalPERS raised its exposure in Indian listed firms to over 150 companies in 2007, from around 50 companies in 2006, data from its latest annual report shows. “The reason for increased investment in Indian listed equities is our intention to shift more of our global equity asset class from US stocks to international, including emerging markets,” a spokesperson of CalPERS told Business Line from its headquarters in Sacramento, California.
Widening universe
In 2007, CalPERS made new investments of over $75 million (Rs 300 crore) in 100 new stocks, as per its annual report for the year ended June 2007. Companies belonging to oil/refineries (26.4 per cent), IT (20 per cent), logistics (14.2 per cent), banks/financial institutions (6.5 per cent) and infrastructure (5.5 per cent) accounting for the lion’s share of the fresh capital.
Though the annual report does not show any investments in real estate companies, the fund’s spokesperson clarified that they have allocated $100 million to IL&FS Investment Managers for the India Realty Fund and $50 million to Sun Apollo for the India Real Estate Fund. The fund’s latest India portfolio shows that CalPERS’ top five sectors were oil/refineries, banks/financial institutions, IT, cement and telecom.
Diversified
With the recent market meltdown taking a toll on stocks, what is CalPERS view now? “We’re not greatly concerned by what — for us as a long-term investor — is what we anticipate will be a temporary downturn in the market,” says the fund, which has managed a 10-year average return of 9.1 per cent per annum, on its investments.
“We are making up some of that (equity) loss with good performance in some of our other asset classes, especially private equity, commodities, and fixed income. This is the value of being a big investor with diversified asset classes that don’t move in lock-step with the market,” explains the CalPERS spokesperson.
Significantly, in December 2007, CalPERS had adopted a new asset allocation mix which has trimmed its overall allocation to stocks, as an asset class.
In the new mix, expected to be in place for the next three years, the fund has reduced the amount meant to be invested in global publicly traded stocks and private equity, by 4 per cent and 7 per cent, respectively.
CalPERS currently has over $5 billion (representing around 5 per cent of its total equity investments) in emerging markets, including India.
The fund has six distinct investment managers for emerging markets – AllianceBernstein, Batterymarch, Dimensional Fund Advisors, Genesis, Lazard and Pictet.
Source: Business Line