NEW YORK (MainStreet) -- The largest public pension plan in America is cashing in its $4 billion stake in hedge funds. The California Public Employees' Retirement System (Calpers) said it's not because of performance issues but because the investments are too complex and costly.
The liquidation of 24 hedge funds and six fund-of-funds, known internally as the Absolute Return Strategies (ARS) program, will occur over the course of nearly a year. Calpers has not yet determined how the assets will be reinvested.
"We are always examining the portfolio to ensure that we are efficiently and cost-effectively achieving our risk-adjusted return goals," Ted Eliopoulos, interim chief investment officer for the nearly $300 billion pension fund, said in a statement. "Hedge funds are certainly a viable strategy for some, but at the end of the day, when judged against their complexity, cost, and the lack of ability to scale at Calpers's size, the ARS program is no longer warranted."
The pension fund reported that in February its board adopted a new asset allocation mix seeking to reduce the risk in the portfolio, while still aiming to meet its annual return goal of 7.5%. Calpers said it earned 18.4% during the 2013-14 fiscal year and has averaged a 12.5% return for the past five years. It also earned an 8.4% return for the past 20 years.