Exclusive: How a More than $50 Billion Bet Boosted CalPERS Returns | Protect Retirement Security for Californians

September 13, 2019

A large move into equity factor investing was key for largest US pension.

The California Public Employees’ Retirement System took a more than $50 billion bet with its $177 billion stock portfolio and won. The bet helped beat volatile equity markets in the 12-month state fiscal year that ended June 30, show interviews and pension system investment committee documents.

The bet in the 12-month period between July 1 and June 30 involved moving around $54 billion from traditional passive cap-weighted equity strategies, which invest more in stocks with the biggest market capitalization, to a factor-based strategy, which picks stocks on attributes like long-term past performance or whether the stock is undervalued.

Eric Baggesen, a CalPERS managing investment director in charge of asset allocation, said that moving the cap-weighted equities to a factor strategy was key in CalPERS achieving a 6.7% return in the 2018-2019 fiscal year, shows a video stream of the pension system’s investment committee meeting on August 19.