Institutional Investors Mergers & Acquisitions / Joint Ventures

CalPERS plots leverage, managed accounts


The California Public Employees' Retirement System is considering applying leverage to its asset allocation as a way to reduce risk in its $200 billion investment portfolio.

According to meeting minutes, a portfolio with a 40% allocation to equities and a 60% allocation to bonds with 2x leverage increases the portfolio's Sharpe ratio to 0.8 from 0.7. The share of equity risk essentially drops to 49% from 76% when compared with a portfolio having the same allocation to un-levered bonds. CalPERS staffers see the employment of levered bonds resulting in a