CalPERS to cut 269 private equity managers
The California Public Employees' Retirement System (CalPERS) is looking to cut its number of GP relationships to less than a third of the current 389.
At a meeting of the CalPERS investment committee on Monday, Real Desrochers - senior investment officer for private equity at the $276.3 billion US pension fund - said the goal is to reduce the number of managers to around 120.
Without detailing a timetable for the reductions, Desrochers said reducing the number of PE managers was in keeping with the program's focus on managers with strong long-term performance. He added that reducing the number of relationships would allow CalPERS to better monitor managers.
So far the number of GP relationships has decreased slightly from 398 to 389 since CalPERS launched its strategic revamp of the program in September 2011. Meanwhile the number of PE funds to receive commitments has gone down over the same period from 762 to 741.
Currently around 75% of the net asset value (NAV) of the fund's PE portfolio is concentrated in 2006 - 2008 vintage years, at the same time CalPERS has identified low commitment levels in 2009-2011 vintage funds as having a likely impact on the ability of the portfolio to achieve the target allocation in future years.
In particular, large commitments to funds-of-funds, representing 12% of portfolio, have been singled out as a drag on the portfolio having generated a net IRR of 4.1%, as of June 30, versus 10.7% for the asset class as a whole.
CalPERS has invested $7.4 billion in PE since September 2011. Of this, $4.7 billion has been in fund commitments, $600 million in co-investments and $2.1 billion commitments to customized investment accounts.
As it stands, PE now accounts for 12% - or $31.34 billion - of the CalPERS investment program overall. Emerging markets - including Asia - account for 10% if this. Of the remainder, 75% goes to the US, 14% goes to Europe and 15 goes to other developed markets.
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