CalPERS to GPs who won’t disclose carry info: Drop dead!

  • CalPERS won’t do future business with non-complying GPs
  • May sell off funds run by non-complying GPs
  • Pension got 98 pct response rate on carry info

Under intense public pressure to disclose more about the costs of private equity, the California Public Employees’ Retirement System has a harsh message for private equity firms that won’t share how much carried interest, or share of profits, that they collect.

“Going forward, we will not do business with firms that refuse to provide this information,” CalPERS Chief Invetsment Officer Ted Eliopoulos said during a media call Tuesday, November 24.

CalPERS had asked all of its general partners to provide the amount of realized and accrued carry they collected from the system. The pension fund got satisfactory information back from 98 percent of its managers, Eliopoulos said. Given CalPERS has about 100 active managers, a good estimate for the number of non-complying firms is two.

Eliopoulos declined to name the non-complying GPs or give reasons why they didn’t provide the information.

He said funds managed by non-complying GPs could be sold off in a secondary sale. CalPERS has been “aggressive” about using the secondary market to manage its portfolio, he said. The system recently closed the sale of a private equity portfolio valued at about $1 billion.

CalPERS released data showing that since the 1990 inception of the private equity program it has paid out to active managers $3.4 billion in carry and collected $24.2 billion in net realized gains.

CalPERS isn’t the only system using its muscle to pressure GPs into releasing more information. The New York City Retirement System sent letters to its GPs in October asking for full disclosure around fees and expenses. Scott Evans, the city system’s CIO, said the comptroller’s office would ask each of the city’s five pension boards to establish policies by which they would not make new or larger commitments to non-complying GPs.

Action Item: Read CalPERS’ carried interest disclosure here: