CalPERS weighs hedge fund return through SMAs, 12 years after exit

CalPERS is exploring a return to hedge funds through separately managed accounts, 12 years after it liquidated its hedge fund portfolio, according to Pensions & Investments.

The $653.8 billion pension fund has discussed hedge fund exposure through SMAs with Goldman Sachs and Dockside Platforms, but no decision has been made, according to correspondence obtained by P&I. The discussions were disclosed through a public records request. Dockside contacted CalPERS in February about its exploration of the SMA market, and in May Goldman Sachs raised the uncorrelated performance of hedge fund managers as a rationale for renewed allocations. June Kim, CalPERS' deputy chief investment officer for capital markets, is leading the review.

An SMA mandate is negotiated with the investor rather than sold as a share class, so any fees, capacity, reporting and liquidity terms CalPERS agrees would be plan-specific. Other allocators could not buy the same terms as a published share class.

CalPERS exited hedge funds in 2014, liquidating investments across 24 hedge funds and six funds of hedge funds as part of a broader effort to reduce portfolio complexity and investment costs.

CalPERS has since adopted a total portfolio approach that integrates investment management and risk allocation across asset classes, and Stephen Gilmore became chief investment officer in 2024. A CalPERS spokesperson said the pension fund regularly evaluates investment opportunities to strengthen portfolio diversification and resilience while meeting its target return.

The correspondence describes a structure under review, not a mandate, and does not specify strategies, size or timing.