CalPERS Invests $3.2B in Blackstone, Other Funds

The California Public Employees Retirement System (CalPERS), the nation’s largest pension fund with more than $463B in assets, has invested $1.85B in two CRE debt funds.

CalPERS disclosed in a meeting document that it has approved a $1.5B commitment to Blackstone Real Estate Debt Strategies V and it has placed $360M into Mesa West Real Estate Income Fund V, according to a report in IPE Real Assets.

CalPERS also made a $750M investment in Brookfield Infrastructure Fund V and a $500M investment in DB SAF C Strategic Partners, the report said. Last month, IPR reported that commitments to Brookfield’s fifth global flagship infrastructure fund had reached $27B.

According to an SEC filing, Blackstone has so far raised $3.59B for its Debt Strategies V fund. The previous fund, Blackstone Real Estate Debt Strategies IV, raised $8B, IPE reported. Debt Strategies IV closed in September 2020.

Mesa West, the real estate credit arm of Morgan Stanley Investment Management, closed on its Mesa West Real Estate Income Fund V, raising $1.37B. The fund will provide original debt, purchase existing loans and manage loans on value-add and transitional assets in the US.

CalPERS signaled in May its intention to review its private equity portfolio with an eye toward increasing its commercial real estate investments.

“We could put more money into private equity, the appetite is there to do it from an investor perspective and from the investment office’s perspective. That will be part of the asset allocation review,” CalPERS CEO Marcie Frost said in an interview with The Financial Times.

In July, CalPERS reported a preliminary net return of 5.8% on its investments for the 12-month period ending on June 30. The report said that public equity investments, which encompass 45% of the total pension fund, outpaced all other asset classes with an estimated 14% return for FY 2022-23.

CalPERS established private debt as a unique asset class last year. The fund said in its Q2 statement that private debt outperformed its policy benchmark and had a preliminary investment return of 6.5%.

Fixed income assets, the pension fund’s second largest component behind public equity investments, finished the fiscal year flat. Private equity and real estate assets reported negative returns of -2.3% and -3.1%, respectively in the Q2 statement, with a caveat that private market asset valuations lag by a quarter, so the results are as of March 31.

“Even with the economic challenges that still confront institutional investors, we have been able to maintain our focus on meeting the long-term retirement promises made to our members and their families,” Frost said, in a statement.