CalPERS committed $1 bln to PE in final months of 2018

-
Calpers, private equity, pension fund
Historic California capitol building in Sacramento. Ron and Patty Thomas/iStock/Getty Images.
  • KKR, PAG Asia Capital, Insight received pledges
  • CalPERS has 8 pct allocation to PE
  • Pacing plan calls for $6 bln commitments for FY ’19

California Public Employees’ Retirement System reported three large private equity commitments for the last two months of 2018, contributing more than $1 billion to the asset class.

The $353 billion pension system committed $300 million to KKR European Fund V and $380 million to PAG Asia III in November, and $400 million to Grandval Fund II in December.

Grandval is a separate account managed by Insight, a growth equity firm, according to a CalPERS spokeswoman.

PAG Asia Fund III is a $6 billion fund that targets investments across sectors including retail, pharmaceuticals, auto services, industrials, financial services and media and entertainment, according to PAG Asia Capital’s website.

KKR European Fund V has a target of 5 billion euros ($5.63 billion).

CalPERS has an 8 percent target allocation to PE. It is working to increase the pacing of its PE commitments through a series of proposals. These include creating two CalPERS-controlled PE funds, which would, at least initially, have the pension system as the sole limited partner.

Even without the direct investing funds, CalPERS is working to increase its PE pledges. The system pledged $5.3 billion to the asset class in the fiscal year ended June 2018 after averaging roughly $3 billion a year from 2011 to 2017.

CalPERS plans to allocate $6 billion to the asset class for fiscal 2019 ending in June. In the first six months of fiscal 2019, it has kept close to that pace, averaging about $530 million in commitments per month.

The largest commitment made in the past six months was $650 million, to Hellman & Friedman’s latest fund, documents show.

Even if it hits the $6 billion target, CalPERS would be a ways off from the $10 billion pacing figure it would need to follow to meet its long-term target, its PE consultant, Meketa, reported last year.

The $10 billion pace wouldn’t, however, be entirely unprecedented for the pension giant, which committed $14 billion in 2007 and $11 billion in 2008 before scaling back sharply as the financial crisis took its toll. CalPERS’s PE portfolio is valued at $27.8 billion.

Action Item: View CalPERS’s investment compliance reports for November and December: https://bit.ly/2SOzdKl