CalPERS interviews PE professionals to lead direct investment funds

  • CalPERS plans long-term investments in core economy businesses,  late-stage health, tech, life sciences
  • Staff interviewed potential leaders of the new funds
  • Ex-CalPERS staff ineligible for leadership roles in new groups

California Public Employees Retirement System is interviewing teams of private equity professionals who could lead two new investment vehicles that are part of the pension fund’s planned PE restructuring.

The $337 billion pension fund is hoping to move quickly on its PE business plan. Investment committee Chair Henry Jones said he expects the plan — which would create two CalPERS-controlled funds focused on long-term investments and late-stage health, science and technology companies — to come to the board for approval in February.

CalPERS investment staff told the board in December that it expected the new organization to get off the ground quickly. Investment Director John Cole said a reasonable timeline would be six to 18 months between board approval and the first deal completed by the two investment vehicles.

CalPERS has already been talking to potential partners to run the new funds, and those partners are likely to be ready with proposed deals, Cole said.

“The potential partners we are considering have … their own pipeline and their own level of due diligence going on in the marketplace,” Cole said. “So it’s not starting from a standing start.”

CalPERS has presented four teams of PE professionals to the board, and two of those teams are still under consideration, a CalPERS staff source who requested anonymity said. Behind closed doors, some board members have expressed reservations about moving ahead with the plan as proposed, the source added.

CalPERS spokeswoman Megan White declined to provide details about who CalPERS might hire to run the Innovation and Horizon funds, saying that nothing has been decided.

“We are still doing due diligence on potential partners,” White said.

Cole said staff has conducted extensive interviews already, aimed at ensuring an alignment of culture and values between CalPERS and the new teams.

Those interviews have addressed the types of people the new partners would hire and how the new organizations would integrate CalPERS’s beliefs and values, principles of corporate governance and sustainability issues.

To avoid conflicts of interest, the management teams would not include any current or former CalPERS employees or board members, Cole said.

CalPERS is pushing ahead with the PE plan despite a leadership transition that includes a new CIO, and a vacancy at the head of its private equity staff.

CalPERS could also see turnover in up to five of its 13 board seats: Jason Perez defeated board President Priya Mathur in an election, Treasurer-elect Fiona Ma will succeed John Chiang, and Gov.-elect Gavin Newsom will have the authority to replace up to three board members.

Action Item: CalPERS staff’s latest presentation to the board on its PE business model: