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Decision to raise allocation to private equity and other assets comes after it missed out on up to $18bn of returns

Calpers, the US’s biggest public pension plan, is to increase its holdings in private markets by more than $30bn and reduce its allocation to stock markets and bonds in an effort to improve returns.

A proposal to increase the $483bn fund’s positions in assets such as private equity and private credit from 33 per cent of the plan to 40 per cent was approved on Monday, according to an announcement by the fund and notes from its board meeting. 

The formal approval comes two years after Calpers admitted that a decision to put its private equity programme on hold for 10 years had cost it up to $18bn in returns.

However, a review of its investment policy found that, despite the gains it had already missed, private equity was still the asset class with the highest expected long-term total return.

“Strong and ongoing growth in private equity returns is behind this measured and appropriate increase,” said Calpers trustee David Miller, chair of the investment committee. 

“Market conditions are evolving and the investment team needs latitude to deploy capital intelligently to keep the fund on track for sustainable returns.”

According to analysis published by Calpers alongside its board notes, private equity was the top-performing asset class in the decade to June 30 2023, with annualised returns of 11.8 per cent. That compares with 8.9 per cent from public equities and 2.4 per cent from fixed income. The documents did not disclose if the figures took account of fees.

The portfolio shake-up, which was confirmed after a scheduled asset allocation review, will bring the California-based plan into line with other big retirement systems in the US, including Calstrs, which has just over 40 per cent of its portfolio in private markets.

As part of the move, Calpers will increase its bet on private equity from 13 per cent to 17 per cent of its portfolio, although this could potentially rise as high as 22 per cent.

At the same time, it is pulling back from investing in stock markets, with its allocation to equities set to fall from 42 per cent to 37 per cent of its portfolio. It will also trim its allocation to fixed income from 30 per cent to 28 per cent.

Last year the Financial Times reported that Calpers was planning a multibillion-dollar move into international venture capital, as the fund moved towards investing in riskier assets to drive returns.

The fund also reported a return of 10.3 per cent last year.

Renault calls for European war chest to tackle Chinese EV competition

Industry grapples with slowdown in sales and rise of cheaper models from China

The boss of Renault has called for a European war chest to fund electric vehicle subsidies and raw materials, as well as joint infrastructure planning, to see off fierce competition from China.

In an appeal to politicians ahead of European elections in June, Luca de Meo advocated a cross-border approach to developing and funding the industry, instead of simply setting deadlines for phasing out petrol and diesel cars. This would include pooling spending on consumer subsidies and creating “green” economic zones with tax breaks on hires at factories.

“When you set a 12-year deadline and say, in 12 years, there’ll be no more producing combustion-engine cars, and if you don’t, here’s a fine, and see you in 12 years at the end of the tunnel, that’s not a strategy,” De Meo said in an interview.  

“We’re proposing trying to build a plan alongside public authorities, people of all industries, non-profits and science bodies . . . it’s about 10 per cent of European output that’s at stake.”

The Renault boss made the call alongside a manifesto sent to European politicians. This recommended investment in regional software development and semiconductors, and a less prescriptive approach to cutting European greenhouse gas emissions. 

The industry is grappling with a slowdown in EV sales across Europe: carmakers have invested heavily in producing them but they are expensive for consumers already squeezed by high inflation. 

A big source of concern is the threat of cheaper Chinese EVs. The European Commission has already launched an investigation of subsidies on cars from the country and is considering higher import duties. 

De Meo declined to give a view on tariffs, but said Europe had to protect its market during the shift to EVs while finding a role for Chinese competitors — in part because European carmakers could learn from a country that was “a generation ahead” in the industry. 

“If we want to accelerate the rise of electric cars in Europe, we need to play with the Chinese and find a way to deal with them,” De Meo said, adding he believed the Chinese were “ready to find a deal”.

This could include incentivising Chinese car manufacturers in Europe to use European suppliers, or encouraging Chinese suppliers to set up in Europe, he said — mirroring China’s policies on overseas manufacturers. 

The Renault group, which also owns the Dacia and Alpine brands, already has partnerships with Chinese carmaker Geely, including on a combustion engines business it is spinning out into a standalone unit. It also has a joint production agreement in South Korea.

German carmakers, which sell more cars in China than their French rivals Renault and Stellantis, are against higher EU tariffs on Chinese cars. The boss of Mercedes-Benz told the FT last week that tariffs should be cut. 

The EU anti-subsidy investigation has also raised concerns about retaliation — China supplies raw materials for EVs such as lithium, cobalt and nickel. De Meo said in the manifesto that “completely closing the door to [China] would be the worst possible response.”

Renault is one of Europe’s smaller carmakers, producing 2.2mn cars a year compared to 6mn from Stellantis and 9.2mn at Volkswagen. 

But De Meo said his rivals would also benefit from a broader and more strategic European approach. 

“If you want to accelerate, you don’t want to end up with Norway at 90 per cent of electric cars and Spain at 4 per cent,” he said. “We should put in one basket all the funds available to give it to those who do not have money for those investments.”

Carmaker says seven in 10 customers paid more than €40,000 for add-ons last year as it delays all-electric model launch

Lavish spending on custom features from wood trim to bespoke paint jobs helped Bentley to report the second-largest annual profit in its history, as the carmaker delayed the release of its first all-electric model on Tuesday.

A record seven out of 10 buyers last year paid for personalised features worth in excess of €40,000, while several commissioned so many custom add-ons that they doubled the price of their cars.

One customer requested wood from his own forest be used in the interior, while another put €400,000 worth of carbon fibre on to the vehicle, the company said.

Levels of custom spend were “jaw dropping”, said chief executive Adrian Hallmark. “Previously it would be one person in Brunei, now we have a handful of people [for whom] we are actively engaged in creating one-off cars”.

Demand for bespoke cars helped offset a major drop in demand from China in the first half of the year, leading to a fall in Bentley’s operating profits to €589mn in 2023, from €708mn the previous year — a record due to a backlog of orders. 

Bentley said profits in 2022 were boosted by unusually high production levels, as it also pushed back its electrification programme on Tuesday amid higher than expected demand for hybrid cars.

The Volkswagen-owned luxury brand will continue selling its hybrid models into the next decade, it said, watering down a previous plan to sell exclusively electric vehicles by 2030. 

Delays to developing the software for its first EV, as well as stronger than expected demand for its hybrid models, has changed the pace at which the company will push towards selling only battery models. 

“There is no question that [battery electric vehicles] are where we will head,” said Hallmark. 

“But we have seen a definite change, not just in the UK, but globally in respect of regulations and governments taking a different view on the rate of movements towards full EVs . . . as well as an uptick in acceptance and demand for hybrids.” 

Bentley had planned to launch its first full EV in 2025, then one more a year until the end of the decade, gradually replacing its engine-only and hybrid models. Now, the first battery model will be launched at the end of 2026, taking the process of renewing its line-up into the next decade. 

The company “may have some hybrids for longer, maybe just for a couple of years,” Hallmark added. 

“We’re not talking about 2035 or 2040, just a few years around the 2030 period. We are not walking away from carbon neutrality, or full EV, but we are going to expand hybrids. This de-risks us against a slower rollout of battery EVs.” 

Sales growth of EVs has slowed across the world, impacting both mass market and luxury buyers. Aston Martin recently pushed back plans for its first mainstream battery car to 2026. 

Last year Bentley sold 13,560 cars, an 11 per cent fall on the previous year but still the third highest in its history. Total revenues were €2.9bn, down 13 per cent year on year, while return on sales eased from 20.9 per cent in 2022 to 20.1 per cent last year. 

Raising prices, cutting costs, and rising demand for higher-margin personalisations has helped the company mount a turnaround in the past five years. In 2019, the last year before the pandemic, Bentley made €65mn of profit on sales of 11,000 cars and revenues of €2bn.