Jan 8, 2018

CalPERS asks for private equity help

CalPERS, the country's largest public pension system, is officially seeking an outside firm to help manage its $26 billion private equity portfolio. We had last discussed this in September as a head-scratching possibility, with BlackRock among the likely applicants.

Bottom line: Never mistake big money for smart money.

  • This could cause some déjà vu for those old enough to recall CalPERS in the dotcom days, when it hired an outside firm to manage venture capital (before not only killing off the agreement, but VC investment altogether... at the next cycle's best buy-in point).
  • Hiring an outside manager would seem to be an exercise in increasing private equity management fees by a public pension that has made cutting such fees a cornerstone of its recent investment strategy (sometimes at the expense of accessing quality funds).
  • Finalists will be interviewed in March and April.
  • It also raises even more questions about what CalPERS will do with the slew of PE investment staffers it hired over the past couple years. These folks mostly have sat on their hands as the pension has sought to slash its number of GP relationships, and now they'll sit on their hands as an outside firm does the work.
  • Calpers currently has an 8.9% allocation to private equity, which is above its 8% target allocation. The current $26 billion size expands to more than $40 billion if unfunded commitments are taken into account.
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