Calpers, the biggest U.S. public pension fund, has fired or will sack a number of its real estate portfolio managers amid steep losses for its property assets, according to a report on its web site.

The Pension Consulting Alliance Inc, in its report to the investment committee of the California Public Employees' Retirement System, said that a number of managers have been or are in the process of being terminated as their performance and judgment proved to be well below expectations.

It said it sees Calpers' real estate portfolio deteriorating further from current levels.

The report was posted on Tuesday on Calpers' website and will be taken up by the fund's investment committee on Monday when it is briefed on gains and losses by the fund's various asset classes.

Property holdings of the roughly $200 billion Calpers have taken a beating, with investments from 2006 and 2007 fueling a 30.1 percent decline in its real estate portfolio in the June-ended quarter and a 48.7 percent year-over-year drop, the fund said.

The real estate portfolio's 10-year net return was 4.4 percent, well below the 8.9 percent return of its benchmark -- and the portfolio may be in for yet more difficult times.

Pension Consulting Alliance said it expects the performance of the real estate portfolio to continue to deteriorate over the next 12 months and potentially longer.

Persistently weak economic conditions, the absence of a functioning commercial mortgage origination/refinancing market and negative leverage are likely to erode income streams and total returns, the report said.

Asset manager BlackRock Inc is among the real estate partners Calpers has been considering dumping, a source familiar with the matter told Reuters last month.

Calpers invested $500 million in a 2006 deal by BlackRock and Tishman Speyer Properties to buy the 11,000-apartment Peter Cooper Village and Stuyvesant Town apartments in New York City that is teetering on default.

Another massive setback for Calpers was its failed $970 million investment in LandSource Communities Development, which held undeveloped land in Southern California. LandSource filed for bankruptcy in 2008.

Calpers in October severed its relationship with Victor MacFarlane, chief executive of MacFarlane Partners, which had advised the fund on the LandSource investment.

(Reporting by Jim Christie; Editing by Dan Grebler)

Investment