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Real estate, infrastructure reviews: staff reports resilience in core real assets and readies to seize dislocations
Summary
CalPERS real assets team reported that the core real‑estate portfolio has outperformed its policy benchmark over multiple time frames and that infrastructure outperformance has contributed to the fund. Staff described market repricing, elevated financing costs and targeted opportunities for well‑capitalized investors; trustees asked for continued
CalPERS staff delivered the annual program review for real assets (real estate and infrastructure), describing portfolio positioning, recent performance, and near‑term deployment themes.
Real estate: staff said the core real‑estate portfolio — which comprises about 90% of the program — has matched or outperformed its policy benchmark over 1, 3, 5 and 10 years and outperformed by about 170 basis points over 10 years. The portfolio’s gross asset value was presented near $77 billion with 93% of assets inside the U.S.; roughly 32% were shown as California‑based. Staff noted that the non‑core/legacy book remains a drag on results and continues to be targeted for disposition.
Market context and strategy: presenters said transaction volumes remain low, financing costs are elevated and refinancing risk persists, but valuations appear to be stabilizing and yields are becoming more attractive. Staff said they are selectively adding non‑core investments and co‑investments where risk/reward is favorable and focusing on high‑quality, defensive assets and manager relationships.
Infrastructure: staff reported the infrastructure portfolio has grown from about $6 billion (2019) to roughly $20 billion today and has outperformed peer benchmarks. The program remains tilted to the U.S. and developed international markets, with sector exposure favoring transportation and digital infrastructure. Staff said certain sectors such as digital infrastructure and energy transition have strong structural tailwinds; limited‑partner fundraising timelines have lengthened, which can present buying opportunities for well‑capitalized LPs.
Sustainability: staff said they are collaborating with Sustainable Investments on governance and climate risk work, have conducted MSCI climate value‑at‑risk analysis for the real‑estate portfolio, and continue energy‑optimization efforts in buildings.
Ending: trustees thanked staff for the conservative underwriting and portfolio quality, asked for continued work on disposition of non‑core assets, and endorsed the team’s readiness to act on targeted opportunities created by market stress.
