Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa Bay news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Charlotte news in your inbox

Catch up on the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Photo by Max Whittaker/Getty Images

There are only three things in life you can count on: Death, taxes and CalPERS doing strange stuff with private equity.

Why it matters: CalPERS is the California Public Employees' Retirement System, which is the country's largest public pension with around $350 billion in assets under management. Of that, around $25 billion is invested in private equity.

Over the years, CalPERS management has treated its private equity strategy like a toddler treats a Netflix queue. Let's try this. No, let's try that. I don't even know what that is, but it sure looks cool.

The latest plan is to create a quasi-independent organization called CalPERS Direct:

CalPERS Direct would be governed by a separate, independent board to advise on allocation and longer-term capital market perspectives. It would consist of two separate funds. One would focus on late-stage investments in technology, life sciences, and healthcare, and the other on long-term investments in established companies. These would operate alongside CalPERS' existing private equity structure that typically invests in co-mingled private equity funds.  

The mastermind here is CalPERS chief investment officer Ted Eliopoulos, who resigned just in time to not oversee its execution.

If that's not a big enough red flag, here are more:

  1. The comp is supposed to be Canada's big public pensions, which have spent the past decade building direct PE investing platforms and deemphasizing indirect investments with outside managers. But those Canadian systems generally maintain oversight rather than creating independent boards. Or, put more simply: CalPERS is creating an indirect model for direct investing, which seems to largely defeat the point.
  2. If a goal is to lower fees, it might be tough given that CalPERS Direct will pay "market rates" to its investment professionals (which also could create grumbles among those dozens of PE staffers still on the CalPERS payroll at below-market rates).
  3. If a goal is to put more money to work, this could be easily accomplished by reigniting commitments to third-party funds — something CalPERS used to do tons of but then slowed way down in the name of negotiating better deals and simplifying the portfolio. I bet SoftBank Vision Fund II could handle a big slug.
  4. If the goal is to increase transparency, then why create a separate governance structure?
  5. Late-stage and Buffett-style strategies are the two hottest trends right now in private equity, which likely means it's a questionable time to launch new programs that won't be ready until the first half of 2019. In fact, CalPERS has a distressing private equity history of diving in near market tops and exiting near market bottoms (see: Capital, Venture).
  6. There was talk last fall about CalPERS outsourcing all or part of its private equity program to a firm like BlackRock. A spokesman tells me that such discussions are "not completely off the table, but on a separate track." Sounds like CalPERS wants a bit of wiggle room in case the new plan falters.

Bottom line: It's certainly possible that CalPERS Direct will improve returns. But stronger odds are that it won't, and that CalPERS will again shift strategy before any of us — or its 1.9 million members — know the ultimate results of what is supposed to be a long-term play.

Go deeper

Dominion sends cease and desist letter to My Pillow CEO Mike Lindell

Photo: Stephen Maturen/Getty Images

Dominion Voting Systems on Monday sent a cease and desist letter to My Pillow CEO Mike Lindell over his spread of misinformation related to the 2020 election.

Why it matters: Trump and several of his allies have pushed false conspiracy theories about the company, leading Dominion to take legal action. It's suing pro-Trump lawyer Sidney Powell for defamation and $1.3 billion in damages, and a Dominion employee has sued Trump himself, OANN and Newsmax.

Off the Rails

Episode 5: The secret CIA plan

Photo illustration: Aïda Amer, Sarah Grillo/Axios. Photo: Zach Gibson/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 5: Trump vs. Gina — The president becomes increasingly rash and devises a plan to tamper with the nation's intelligence command.

In his final weeks in office, after losing the election to Joe Biden, President Donald Trump embarked on a vengeful exit strategy that included a hasty and ill-thought-out plan to jam up CIA Director Gina Haspel by firing her top deputy and replacing him with a protege of Republican Congressman Devin Nunes.

Updated 6 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Annelise Capossela/Axios

  1. Health: CDC director defends agency's response to pandemic — CDC warns highly transmissible coronavirus variant could become dominant in U.S. in March.
  2. Politics: Empire State Building among hundreds to light up in Biden inauguration coronavirus tribute.
  3. Vaccine: Fauci: 100 million doses in 100 days is "absolutely" doable.
  4. Economy: Unemployment filings explode again.
  5. Tech: Kids' screen time sees a big increase.