It's been a dismal year for pension giant CalPERS. The fund lagged the Wilshire large public fund universe median return by six percentage points for the 12 months that ended June 30, reports Pensions & Investments Online.

The culprit seems to be the "beta overlay" on its near $6 billion Risk Managed Absolute Return Strategies portfolio. The overlay seems to be an attempt to attain portable alpha-like gains to goose returns in order to align the overall portfolio with a more appropriate index, one that includes hedge funds' returns.

The effort was apparently managed internally, but it backfired miserably in the face of the global markets swoon. The effort began in May 2008, the article notes, and was compounded by a decision to go long in futures--which also backfired. 

For more:
- here's the article

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