CalPERS is set to change its benchmarks for measuring performance compensation for senior investment staff so they are consistent with recent changes to its strategic asset allocation.
Earlier in the year CalPERS introduced a range of new benchmarks, including composite benchmarks for the new asset classes. The proposed performance plan will align with these benchmark changes.
The restructure of asset classes resulted in assets being classified in five main groupings: growth, income, inflation, real assets and liquidity.
Some of the key performance changes reflect CalPERS’ economic outlook for likely returns in the coming year, with infrastructure performance benchmark changed from CPI plus 5 per cent to CPI.
AIM (private equity) moved to a global public markets-based benchmark to better align with global equity and total fund policy benchmark.
In forestland the benchmark for measuring performance was changed to NCREIF Timberland.
Performance plans will also take into account both quantitative and qualitative measures.
Chief investment officer, Joe Dear (pictured), will have 70 per cent of his performance compensation in quantitative measures, calculated on a sliding scale of performance above a series of basis points hurdles for the total fund.
Of his performance remuneration, 20 per cent will depend on qualitative factors such as leadership, succession planning, risk management and teamwork.
The remaining 10 per cent will be decided by performance in enterprise-wide initiatives during the fiscal year.
The board will review the new performance measures at its May 17 meeting. A second board level review is set for June to further refine certain benchmarks and incentive schedules.
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