CalPERS Seeks Advisors to Broaden Reach in Hedge Fund Market; Expansion Will Look to Diversify Investment Strategies and Styles.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--Feb. 18, 2003

The California Public Employees' Retirement System's (CalPERS) Board of Administration today approved an expansion of its hedge fund program in an effort to increase returns.

Under the plan, CalPERS will make a number of changes to attract top managers and successfully position the pension fund as the investor of choice in the hedge fund industry, including:

-- broadening the universe of investment styles and strategies by creating a pool of strategic advisors;

-- retaining the State Street Bank International Fund Services system to ensure improved transparency, sound fund accounting, compliance, risk monitoring and accurate reporting on the program; and

-- renaming of the program to "Absolute Return Strategies" to better characterize the full range of unique, nontraditional innovative strategies to be considered for added returns.

CalPERS Board will consider an additional allocation to the program in the next several months.

"We want to cast a wide net to capture the best of the best," said Robert Carlson, Acting President of CalPERS Board of Administration. "A stable of advisors will give us the flexibility to capture a broad universe of investment styles and strategies, and will provide bench strength for added due diligence, monitoring and management.

"In making these changes, we can continue to provide leadership to large institutions and public funds that make hedge fund investments."

New York-based Blackstone Alternative Asset Management, the System's strategic advisor, is expected to be included in the pool of advisors.

CalPERS' large capital commitment and its leading edge investment techniques in assessing risk and optimal plan design have proven successful to its hedge fund strategies.

The fund posted a 2.4 percent return in its hedge fund program through December 31, 2002 since making its first investment in April 2002. (By comparison, the program's benchmark -- a 50 percent split between the Wilshire 2500 and 1 year Treasuries -- lost 7.7 percent.)

"Our move has come at the right time," said Sean Harrigan, Acting Chair of the System's Investment Committee. "We are able to offset losses that we would have otherwise sustained in the equity markets. This is a perfect example of diversification paying off."

CalPERS has invested $550 million to 13 hedge fund managers. The latest additions include a $25 million investment to London-based Lansdowne Partners, a long/short European equity manager, and $25 million investment to Miami, Florida-based Matador Capital Management, a bottom-up U.S. equity hedge fund.

CalPERS is the nation's largest public pension fund with assets of approximately $133.8 billion. The System proves retirement and health benefits to 1.3 million State and public employees and their families. For further information about CalPERS, please visit the System's web site at www.calpers.ca.gov.