A Rs 2,000 crore pension fund holds 50% listed equity, 35% bonds and 15% private assets, with Rs 180 crore of unfunded commitments. Equities fall 30% and private assets are marked down 10%. What is the new private weight, can it meet its capital calls, and what should it do?

The private weight rises to about 16.2% without a rupee being bought, and the fund can meet its calls. Private assets are Rs 270 crore of Rs 1,670 crore. If all Rs 180 crore is called from bonds, the weight reaches 26.9%, above the 20% cap, yet bonds of Rs 700 crore cover calls and pensions for years. The committee should not sell private stakes at a discount: rebalance listed assets, slow new commitments and treat the stale marks with caution.

Because a weight is a fraction, and the bottom of the fraction fell faster than the top. Private assets fell 10% to Rs 270 crore, but the whole fund fell 16.5% to Rs 1,670 crore, so private rose from 15.0% to 16.2%. This is the denominator effectWhen the rest of a portfolio falls in value, an asset whose value falls less becomes a larger share, even though nothing was bought.. A family whose savings shrink while the house holds its value finds the house is suddenly a bigger share of its wealth, without buying another room.

They are money the fund has promised and must pay when asked. If all Rs 180 crore is called and paid from bonds, private assets become Rs 450 crore of the same Rs 1,670 crore, 26.9%, well above the 20% cap, and bonds shrink to Rs 520 crore. This is why committees watch exposure, invested plus unfunded, and not just the invested weight.

Yes, comfortably. Calls of about Rs 60 crore a year for three years plus Rs 60 crore of net pension payments is Rs 120 crore a year. Even after rebalancing, the bond sleeve of about Rs 576 crore covers about 4.8 years of that without touching equities or private assets. Distributions from older private funds, which slow in a downturn but rarely stop, add to the cushion. The problem is the weight, not the cash.

Probably not yet. Private funds value their holdings quarterly and with a lag, so a 10% markdown in a year listed equity fell 30% is likely to grow. If private values had really fallen 20%, the weight would be 14.6%; if they fell like listed equity, 13.0%, below target. Part of the overweight is an artefact of stale prices, which is a strong reason not to sell into it.

Four things. Do not sell private stakes to fix the weight: selling the Rs 19.5 crore overweight on the secondary market at a 20% discount would lock in a Rs 3.9 crore loss to correct a number that stale marks may soon correct on their own. Rebalance the listed assets, buying about Rs 124 crore of equity with bonds, which buys after the fall rather than before. Slow or pause new commitments for a year, so future calls do not push exposure further. And widen the policy to allow temporary drift above target caused by market moves, reviewed quarterly, so the committee is not forced into a sale by arithmetic.