CalPERS commits $3.4bn more than it receives in Q3

California Public Employees’ Retirement System contributed $3.4 billion more to private equity funds than it received in distributions during the third quarter of 2023.

Cashflow generated by private equity portfolios have become a focal point in the industry as sluggish exit markets limit what GPs can return to their investors.

CalPERS’ large disparity also reflects the extensive build-out of its private equity program, which had been the system’s top priority under the tenure of former CIO Nicole Musicco.

Information about CalPERS’s private equity portfolio was included in documents reviewed by Buyouts ahead of its investment committee meeting scheduled for November 13. The documents show the system committed $4.4 billion to funds between July and September against $1 billion in distributions – a negative cashflow of $3.4 billion.

During the same time period last year, contributions outpaced distributions by $404 million, according to board documents. In the second quarter of this year, CalPERS committed $2.1 billion more to its fund partners than was returned.

The $452.3 billion system has embarked on major changes to its private equity program as a way to compensate for what former CIO Musicco described as a “lost decade” of under-allocation to the asset class.

Some of the major changes introduced under Musicco’s watch included increasing the dollar value of commitments that staff could make without needing managerial or investment committee approvals, policies allowing for increased co-investment opportunities, and an increased focus on direct investing.

CalPERS made about $3.5 billion in commitments to private equity funds from April through June, the largest of which was a $411 million contribution to Blackwell Capital Partners, according to board documents.

The system also reported it paid $642 million in management fees and $698 million in carried interest for the year ending March 31. CalPERS’s largest management fee was $19.6 million to EQT IX, to which it committed $750 million in 2021. The biggest carried interest payout was $65.7 million to the 2013-vintage Carlyle Partners VI.

In 2022, CalPERS paid $640 million in management fees and $698 million in carried interest, board documents said.