CalPERS commits ~$1.5 bln to PE in August and September

  • For year ended June, PE pacing up to $5.3 bln from $3.3 bln
  • CalPERS to limit GP relationships to 30-45
  • To keep PE allocation near 10 pct, CalPERS eyes nontraditional ways to deploy capital

California Public Employees’ Retirement System in August and September committed about $1.5 billion to five private equity funds, including $650 million to Hellman & Friedman’s latest fund, documents show.

The $350 billion pension fund has grappled with a range of new approaches to private equity to meet an allocation target of 10 percent, but it continues to commit to traditional PE funds.

CalPERS has targeted $6 billion in commitments for 2019, and its consultant, Meketa, estimated it would take $10 billion a year to stay at the pension fund’s desired allocation.

The biggest commitment of the past two months went to Hellman & Friedman Capital Partners IX, which closed on $16 billion in October. The commitment was made in September.

The Hellman & Friedman fund focuses on buyouts in North America and Europe and has been popular with other large U.S. pension funds.

New York State Teachers’ Retirement System, which manages $115 billion, made its largest commitment of the quarter to Hellman & Friedman, committing up to $300 million to its Capital Partners IX fund.

The $79 billion Oregon Public Employees’ Retirement Fund committed $350 million to the fund, in its first test of a newly raised cap for commitments made under delegated authority. Oregon had previously been limited to commitments of $250 million or less.

CalPERS also made four PE commitments in August, totaling $875 million. The fund committed $400 million to Vista Equity Partners Fund VII-Z, $200 million to TPG Golden Bear Partners, $200 million to Tailwind Capital Partners III and $75 million to Palladium Equity Partners V.

CalPERS has been attempting to ramp its PE activity after committing between $2 billion and $4 billion to the asset class for calendar years 2011 to 2018, a recent review by Meketa shows.

The pension committed $5.3 billion for the fiscal year that ended in June 2018, including $2.7 billion for the first half of calendar 2018.

CalPERS is focusing on larger commitments as it works to trim its PE portfolio.

Interim PE head Sarah Corr said CalPERS has about 90 GP relationships and plans to continue committing to just 30 to 45 of them going forward, not including a separate program designed to support emerging managers.

“We have reduced the number of general partner relationships from several hundred to about 90 today, with a target of about 40,” Corr said at CalPERS’s Nov. 13 investment committee meeting.

“We think that makes sense in order not to dilute our impact and as a result the returns from the entire private equity portfolio.”

Action Item: See Meketa’s recent review of CalPERS’ PE program here