The nation’s largest pension fund stunned Wall Street recently with its move to cut in half the number of outside firm’s handling its money and eliminate hedge funds in order to cut down on fees.
CalPERS (California Public Employees Retirement System) CIO Ted Eliopoulos told FOX Business Network’s Maria Bartiromo: “This was part of a multi-year effort on CalPERS’ part to cut costs, reduce complexity … and the amount of risk … in our portfolios.”
According to Eliopoulos, the fund has taken a series of steps since the financial crisis, including managing two-thirds of its portfolio “in house.”
“We can manage and pay for that management for a basis-point or two. Extraordinarily efficient -- one of our biggest strengths,” he said.
Eliopoulos said the size of the $4 billion hedge fund portfolio “wasn’t big enough to begin with, and we weren’t convinced that we could scale it.”
“Looking at the performance of our private equity portfolio in contrast to our hedge fund program -- very sustained outperformance [for] long periods of time,” he said.
With $300 billion in assets, Eliopoulos says right now the fund is “slightly overweight” stocks because there aren’t any other opportunities.
“We are a very long-term investor. Our approach is to look out over many cycles … Right now we have about 54% allocated to the global equity market, it’s a slight overweight to our target of 52%. And that really reflects our judgment on balance -- there are not a lot of really good choices amongst the asset classes today. But on balance it favors the risk assets moderately,” he said.