Loss-laden CalPERS relies on bear market lessons to get through downturn

The California Public Employees Retirement System, known as CalPERS, had a total portfolio value of $185 billion on Friday, down 23% from $239 billion at the start of its fiscal year.

CalPERS expects to survive the falling market and credit crunch by applying the lessons it learned from the dot-com bust at the start of the decade, said President Rob Feckner.

"We're going to weather the storm and come out better than the last time," he said. "Then, we lost $50 billion and made back over $120 billion. I see us being in the same position this time."

Recent losses are larger in total value, but "percentage-wise, we're in better shape now than then," said Feckner, an employee of the Napa Unified School District, who is finishing his fourth year as head of the 13-member CalPERS board.

CalPERS is invested in stocks, bonds, real estate, private equity funds and, lately, commodities. Proceeds pay for health benefits as well as current and future pension benefits for 1.6 million state and local government and school district employees.

CalPERS "is taking hits across all asset classes," Feckner said. But the losses would have been even greater "if we had not spread our money out" by diversifying investments.

CalPERS' losses come during a difficult period internally for a fund that's operating without the benefit of either a chief executive or chief investment officer. A recruiting firm is evaluating three dozen candidates for the CEO post, which should be filled by mid-December, he said. The chief investment officer should be on board by mid-February, he said.

For now, working with interim executives, CalPERS is sticking with a strategy that leans heavily on stocks, which account for about 40% of its holdings. No decision has been made about shifting the investment mix -- possibly toward bonds and other fixed-income assets, Feckner said.

CalPERS is not scheduled to reevaluate its investment allocation until December, Feckner said. But he doesn't expect his experts to come up with any magic formula to quickly rebuild the portfolio. "At this point, I don't think anyone knows what a safe harbor looks like, so we'll stay the course."