Firms & Funds

CalPERS grosses $434 mln from secondary sale of 26 fund stakes: Updated

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calpers
Calpers headquarters is seen in Sacramento, California, October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker (UNITED STATES BUSINESS)
  • Sale included funds managed by 16 managers
  • Follows up similar sale completed in first half of 2016
  • CalPERS commits to new CD&R, Carlyle funds

California Public Employees’ Retirement System in the second half grossed $434 million from the sale of its stakes in 26 private equity funds managed by 16 firms, according to a Pension Consulting Alliancereport included in materials for an upcoming meeting.

Update: The sale was an auction process run by staff with Cogent as an advisor, according to CalPERS. There were multiple buyers for different funds.

CalPERS previously sold its stakes in 46 funds during the first half of 2016, pension documents show. Those deals, which included funds managed by 24 firms, generated $450 million in gross proceeds.

The $307 billion retirement system is in the process of concentrating its private equity portfolio in the hands of fewer managers.

The system is paring its roster of managers by selectively re-upping with core managers, allocating larger amounts to new funds and separate accounts, and engaging the secondary market as a seller. In 2015, CalPERS said it would reduce the number of relationships in its PE portfolio to around 30 general partners from 100, The Wall Street Journal reported.

Consistent with that approach, CalPERS committed $150 million to Carlyle Strategic Partners IV in November. Carlyle Group is a longtime CalPERS GP and manages some 6 percent of the retirement system’s $25.4 billion PE portfolio, the Pension Consulting Alliance report says. Fund IV, its latest distressed-debt fund, had raised more than $2.2 billion as of Jan. 30, according to an SEC filing.

The retirement system will occasionally form new relationships with GPs as well. In December, CalPERS committed $150 million to Clayton, Dubilier & Rice Fund X, its first with with the 39-year-old buyout firm. Clayton Dubilier & Rice had raised $6 billion for its latest flagship fund as of late December, Reuters reported.

CalPERS held 8.4 percent of its assets in PE, above its 8 percent interim target allocation to the asset class, according to the Pension Consulting Alliance report. The portfolio has delivered a 9.8 percent return on a 10-year time-weighted return, 3 percentage points short of its policy benchmark.

Action Item: For more information about CalPERS, visit www.calpers.ca.gov