The California Public Employees' Retirement System, the nation's largest public pension fund, is paying dearly for its ill-fated decision to become one of the most aggressive real-estate investors among public pensions.

Amid the rapid decline in the housing market, the value of Calpers's investments in land and housing projects across the country had fallen 35%, to about $6 billion, as of June 30, according to recent performance results released Wednesday by Calpers.

For the quarter ended June 30, Calpers says it expects a loss even greater than 100 percent for its once high-yielding land and housing investments, thanks to its use of borrowed money on deals. The losses also dragged into negative territory the quarterly returns on its overall $22 billion real-estate portfolio, typically one of the pension fund's most profitable.

The losses are likely to be larger now because the values were based on appraisals completed at the end of March. Since then, land values have cratered nationwide, as evidenced by the bankruptcy-protection filing of one high-profile Calpers undertaking, the LandSource land venture in California. An investment vehicle funded by Calpers sank $970 million in that venture, which holds 15,000 acres outside Los Angeles.


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