CalPERS goes large with $2.7 bln of PE commitments in first half

  • 8 pct target to PE; actual allocation 7.7 pct
  • Commitment target for year $6 bln; total so far $2.7 bln
  • Blackstone, TPG got largest H1 commitments
  • Largest manager relationships: BX and Carlyle
  • Why this is important: Consultant Meketa sees No. 1 public pension on track to meet pacing target

California Public Employees’ Retirement System pledged $2.7 billion across 10 commitments to eight private equity firms in the first half, putting it on track to meet a $6 billion goal for the year, according to Meketa, the retirement system’s PE consultant.

CalPERS has an 8 percent target allocation to the asset class, and as of June 30 it had a 7.7 percent actual allocation, Meketa said.

Meketa’s Steven Hartt, speaking at the system’s August meeting, reviewed CalPERS’s PE commitments and said the system was on track to meet its annual pacing target.

“Six billion is what’s expected for the full fiscal year, and at $2.7 billion, it’s about on track,” Hartt said.

The largest commitments in the first half were $500 million to Blackstone’s Tactical Opportunities Fund III, and TPG Partners VIII, which is trying to raise $12 billion.

Other commitments included:

  • $400 million to Towerbrook Investors V, which closed on $4.25 billion in June;
    • $250 million to Towerbrook Structured Opportunities II, which closed on $1.05 billion in June;
    • $370 million to Carlyle Europe Partners V;
    • $300 million to TPG Asia VII, targeting $4.5 billion;
    • $200 million to Permira Growth Opportunities, its debut growth tech fund, which could raise up to $2 billion;
    • $100 million to TPG Healthcare Partners, targeting $2.5 billion;
    • $75 million to Clearlake Capital Partners V, which closed on $3.6 billion in March;
    • $50 mln to GCM Grosvenor DEM II, which is CalPERS’s fund of funds for emerging managers

The recent commitments included investments with CalPERS’s two largest manager relationships, Blackstone and Carlyle.

CalPERS invested in 19 Blackstone vehicles, with $4.37 billion in total exposure, and 25 Carlyle vehicles, with $3.03 billion in total exposure, according to Meketa.

CalPERS’s PE portfolio is diversified by strategy, with buyouts representing 64 percent of CalPERS’s total private equity net asset value.

Within buyouts, CalPERS tends toward mega and large buyout funds, which represent some 55 percent of CalPERS’s buyouts exposure, according to Meketa.

CalPERS recently updated its PE-investment policy to increase the target range for buyouts to 65 percent from 60 percent.

The nation’s largest public pension has been exploring new models for PE investment, seeking to reduce the number of managers it works with and increase its direct investments and co-investments.

The board is weighing a proposal, CalPERS Direct, that would create two new CalPERS-controlled entities to boost the system’s PE allocation. The first would invest in late-stage technology, life sciences and healthcare companies, while the second would make long-term investments in established companies.

CalPERS currently invests 72 percent of its PE portfolio in traditional general-partner-managed funds, with just 6 percent in co-investments and direct investments.

Action Item: To review CalPERS emerging-manager portfolio, click here