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CalPERS hopes to strike it rich in Golden State

  • $80 mln account will target California companies
  • Will focus on mezzanine debt
  • Represents third phase of “California Initiative”

The California Public Employees’ Retirement System increased its allocation to in-state private equity by committing $80 million to a California-focused separate account managed by GCM Grosvenor, according to a Nov. 5 announcement.

GCM Grosvenor will invest the California Mezzanine Investments account over the next four years, providing mezzanine debt to California companies.

“CalPERS is committed to California,” CalPERS CIO Ted Eliopoulos said in the statement. “It’s great to have a hand in stimulating job creation and economic growth in our home state as we seek the best risk-adjusted returns for the portfolio.”

The commitment serves as the third phase of the $300 billion retirement system’s California Initiative, which it launched in 2001 to invest in underserved communities.

The first phase featured a $375 million fund of funds managed by CalPERS and a $100 million account managed by Bank of America. The Bank of America account had generated a negative 0.4 percent internal rate of return and 1x multiple as of March 31, according to CalPERS. Return information for the CalPERS-managed fund of funds was not available as of press time.

In 2006, CalPERS committed an additional $560 million to the program through the Hamilton Lane-managed Golden State Investment Fund. That vehicle had generated a 7.9 percent IRR and 1.4x multiple as of March 31, according to CalPERS.

CalPERS’ latest commitment to GCM Grosvenor is its second in as many months. In October, it allocated $200 million to GCM to form an emerging managers-focused fund-of-funds.

CalPERS was slightly above its 10 percent allocation to private equity as of May, according to its website. The retirement system said its private equity portfolio is worth $31.4 billion.