NEW YORK (CNNfn) - The California Public Employees Retirement System (CalPERS) is planning to invest as much as $11.25 billion in hedge funds, according to published reports.|
CalPERS board approved the change in investment strategy at a meeting two weeks ago, according to the Financial Times newspaper.
In Wednesday's edition the newspaper said the pension fund's board approved a plan to move as much as one-quarter of the $45 billion the system invests in public markets into hedge funds. CalPERS also owns properties and holds non-negotiable securities for a total of $160 billion in the system's coffers.
The system made its first hedge-fund investment last week when it committed to put $300 million into the Pivotal Partners Fund, a hedge fund established last year by two former money managers from Amerindo Investment Advisors, according to the Financial Times.
CalPERS is an active investor in stocks and bonds, but had never before invested in hedge funds.
CalPERS told the newspaper it was "in no rush" to invest the full $11.25 billion, and emphasized that it would look at other hybrid investments such as arbitrage funds.
"We are simply branching out and becoming more diversified," a spokesman told the newspaper. "Hedge funds are not quite as risky as private equity funds, and we will steer clear of funds that use a lot of leverage to make bets on the market."
The news that the nation's largest public pension funds plans to move into the hedge-fund market as a way to boost returns comes almost a year after the collapse of hedge fund Long-Term Capital Management triggered a crisis on Wall Street.
CalPERS provides retirement and health benefits to more than 1 million state and local public employees and their families.