And 3% of assets is on the low side. I think most were targeting 4% allocations, and now I’m hearing some are moving north of 10%, which should keep the commodities going for quite a while.

Calpers to Increase Commodity Assets to as Much as $7.2 Bil

by Saijel Kishan

(Bloomberg) The California Public Employees’ Retirement System, the largest U.S. pension fund, will increase investment in commodities to as much as $7.2 billion in the next two years as raw materials prices surge to records.

Calpers, which has $240 billion in assets, agreed at a Feb. 19 board meeting to invest between 0.5 percent and 3 percent of its assets in commodities through 2010, said Clark McKinley, a spokesman for the Sacremento, California-based fund.

“We plan on ramping up the program by hiring additional staff,” he said by phone yesterday. “We are excited about commodities, which have performed exceptionally well for us.”

The fund in March invested $450 million in commodities, its first such investment, by tracking the Standard & Poor’s GSCI index of 24 commodities. The index has returned 10 percent so far this year, adding to a 33 percent gain in 2007, as oil rose above $100 a barrel and wheat breached $13 a bushel for the first time. Gold and platinum also climbed to all-time highs.

Calpers, which covers the benefits of more than 1.5 million California state and local government employees, will set the proportion of assets invested in commodities “depending on market opportunities,” McKinley said.

The fund plans to allow its staff to actively manage some of its commodity investments this year, he added.