Candidates to help run California Public Employees Retirement System’s planned direct investment funds backed out due to an article that named two people associated with Silver Lake as being in the running, according to Henry Jones, president of CalPERS’s board.
Jones divulged the recruiting challenges at a Retired Public Employees Association of California picnic in Santa Cruz on Aug. 6 and it was captured on a recording given to Buyouts.
Jones was responding to a question about the status of plans to create two funds that CalPERS would create and have private equity professionals run. He said CalPERS staff and the board had been speaking to private equity professionals about the plan.
“It wasn’t an interview, just [that] this is the type of people we’re looking at to do this work, and they were bringing them in and then the board would have a conversation with these potential people,” Jones said. “The problem was several of them bailed out because the information about them was leaked to the press. And so therefore they said, ‘I do not want to continue with this, stay with this endeavor.’”
CalPERS plans to create two of its own direct investment funds, “Horizon” and “Innovation,” to be valued at $10 billion each and run directly by private equity professionals. Innovation would target late-stage venture type deals, while Horizon would focus on long-hold investments.
In January, John Cole, CalPERS’s senior portfolio manager for global equities, told Bloomberg in an on-the-record interview about two of the candidates CalPERS had been speaking with: David Roux and Adam Grosser, both of whom have worked with Silver Lake. Roux co-founded the firm before stepping away in 2010, and Grosser ran one of their funds and is now a senior adviser.
Silver Lake had no comment. Neither Roux nor Grosser responded to LinkedIn messages requesting comment.
Jones confirmed to Buyouts that he was referring to the Bloomberg article at the RPEA picnic. “I was attempting to tell them we’re still pursuing, we’re looking at the options,” he told Buyouts.
Jones added he was “not at liberty to talk about” whether there were any additional private equity professionals who had walked away due to the Bloomberg article. He also did not confirm that Roux or Grosser themselves had left over the article.
At the Aug. 6 picnic, Jones said staff “backed off” after that, but that private equity was still a priority for CalPERS. “Staff is still looking, the board hasn’t made a final decision to go or no go, they’re still looking at ways to implement a strategy to get more money into private equity,” he said in the recording. “They will keep giving us updates but we have not made a decision to go or no go yet.”
Jones again told Buyouts the issues with the private equity program had nothing to do with a controversial code of conduct introduced at last month’s CalPERS offsite board meeting, and which will have its first reading Tuesday.
Board member Margaret Brown has told Buyouts she also has issues with sections of the code of conduct concerning confidentiality and speaking to the media.
CalPERS’s monthly board meeting runs from Monday until Wednesday at its headquarters in Sacramento. CalPERS told Buyouts that Chief Investment Officer Yu “Ben” Meng will provide a scheduled update on the PE program at next month’s meeting, set for Sept. 16-18.
Action Item: read the CalPERS proposed code of conduct here.