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PIMCO, AllianceBernstein Face Over Half A Billion In Calpers Redemptions; Weakness For High Yield Market Approaching
Not a good day for PIMCO as Calpers continues scapegoating for its deplorable performance, and today the California Pension manager decided to trim its exposure to PIMCO. In doing so, Calpers slammed the Newport Beach firm for being too risk averse (watch out Bill, you know what happened to John Mack for being too timid): "While PIMCO managed to return 35.06% [from January to September 2009], PIMCO's aversion to risk resulted in underperforming the benchmark return of 47.45% by 1,238 bp." The result: Calpers is pulling $100 million from PIMCO, however it is not firing the manager altogether and instead will consider "allocating more assets to PIMCO in the future when risk aversion is expected to produce alpha in the high yield market."
Ironically, Calpers, being the rocket scientists they are, contradicts itself in the very same memo, when it discusses the reason why it is cutting its allocation in another fixed income manager AllianceBernstein from $948 million to half a billion: "Because the significant rally in corporate credit is most likely done, reducing exposure to [AllianceBernstein] to $500 million on an incremental basis is justified (an underweight in the portfolio as a whole)."
So on one hand Calpers is punishing PIMCO for being too risk averse at the same time as it is withdrawing money from AB for having too much risk exposure. Brilliant. Nonetheless, the two take home messages are: at least according to Calpers, the corporate credit rally is done. That is disappointing: we were hoping CCC- rated bonds could trade from par to at least 200 with the maniacs running fixed income trading floors these days. And second: stay out of the HY way. With almost $600 million in dispositions coming to a BWIC near you, courtesy of the Calpers redemption, the next month should prove rather challenging for bonds.
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dumb. dumb. dumb - calpers of cause...
Calpers is the single worst asset allocator in history.
Excellent of TD to point out the contradiction - pulling funds from PIMCO cause they didn't roll the dice, and from AB because the dice rolling is at the end.
The next governator of CA should do the retirees a favor and legislate that Calpers invest in high quality corporate bonds and be done with it. The savings from paying the morons who run that fund would more than make up for any "opportunity costs".
Bourbons reincarnate
It looks as if Calpers is on a culpability quest. If they could only find a nice, silvery, reflective surface.
How did pimco do last year?
If you saw CalPers opulent, glorious new HQ building in Sac...
Marble entry ways, beautiful brass outdoor lighting fixtures, marvelous glass spiral staircase with water fountain, brass plated glass encased fire extinguisher holders...
All paid for on the tax payer (or pensioners) dime...
You would understand Tyler... these ARE ROCKET SCIENTISTS!
More west coast Rubins at work...
Disclosure: I hope none of the above violates any of Marla's new rules and etiquette crackdown...
sickening, isnt' it? especially given their track record.
of course they would feed you some horseshit about "risk-adjusted" performance or "maximizing alpha" or some other such crap.
CALPERS is moving lots of money into cash everything else was smoke.
Heck, I had Dallas plus the points last weekend. Calpers should give me their money. I can get them 100% next weekend.
"Calpers should give me their money. I can get them 100% next weekend."
Spoken like a man who does God's work.
Short JNK, HYT...
Sawyer (Jim LaFleur)
instead will consider "allocating more assets to PIMCO in the future when risk aversion is expected to produce alpha in the high yield market."
Translation, we will consider allocating more assets to PIMCO *after* they have a market beating year, but for now we'll chase last year's performance with a manager who will no doubt revert to the mean and underperform this year.
And they say retail investors are idiots. If I were Goldman Sachs, *I'd* sell CALPERS anything I didn't want to hold onto myself. What a bunch of idiots.It's not that they're pulling their money from PIMCO, which is their prerogative, but the rationale! So specious!
Maybe Nancy Pelosi can help...
insert (dancing banana)
CalPers is certainly the dumbest large asset manager. Their investments are truly shocking. I've been in a number of CalPers deals that were so stupid on their part that we laughed about it in the office. They would take on recourse debt for land development deals when not even gunslinger entrepreneurs were doing that. CalPers had such a lack of understanding of the market fundamentals that they didn't realize they could avoid recourse loans by just asking. Of course they lost billions if you add the deals up. Its strange investing in a deal that you feel certain will fail just because you know CalPers is going to pay you back.
As someone noted above, I would bet CalPers is looking for liquidity and that's why they contradicted themselves, they don't want to publicly state they are selling investments in order to have more liquidity.
CALPERS Board= a walking cesspool of conflicts.
It pays to be stupid.
good move calpers.