CalPERS Risk Management System

CalPERS recently implemented the large-scale CalPERS Risk Management System - a comprehensive framework for measuring, monitoring, and managing risk. The key goals of the Risk Management team are to achieve an enterprise-wide view of the investment and risk profile at CalPERS, increase return on risk taken, and establish an appropriately focused risk culture.

Effective data management is necessary for the information generated from the Risk Management System to be timely and accurate. The new system included the development of a central data repository for all investment information prior to entry into the system. This allows us to capture each and every piece of portfolio and benchmark data, streamline modeling, reconciliation, and reporting processes. The system provides for online monthly, and soon weekly, risk reports to investment decision-makers, providing enhanced opportunities for additional investment returns.

The CalPERS Risk Management System helps us to answer the question "how are we doing?". It provides CalPERS with a methodology to integrate returns with risk management and to incorporate risk targeting and measurement into the daily portfolio management process. The system design provides flexibility and scalability to grow with our future requirements.

The flow of information to the investment community is virtually instantaneous. Capturing this information in a timely manner is critical to making investment decisions. Recent world events have demonstrated the need to react with opportune evaluations. We are continuously enhancing our current risk management process and providing our investment professionals a consolidated and timely enterprise-wide view of risk.

The Investment Committee now receives in-depth analysis of the risk impact to CalPERS Total Fund of proposed investment opportunities. The risk group now publishes a monthly newsletter summarizing changes in risk within the asset classes and Total Fund, as well as reporting on special risk-related topics. Risk management will continue to further itself as a driving force in the decision-making process used for our portfolio management.

Dated: 02-13-2007