CalPERS Invests in Two PE Funds

Pushing forward on plans to increase the size of its private equity portfolio by $1.35 billion over the next five years, the California Public Employees’ Retirement System (CalPERS) last month made $250 million worth of new commitments to two investment funds. CalPERS invested $125 million in Silver Lake Partners II, a fund managed by Silver Lake Technology Management of Menlo Park, Calif., that’s targeted to top off at $3 billion. The Silver Lake fund will invest in buyout and recapitalization deals in the technology industry. The firm’s first investment fund, a 1999 fund with $2.3 billion in its coffers, has posted returns of more than 30%, according to data supplied by CalPERS. CalPERS invested $65 million in that fund.

CalPERS also made a $125 million commitment to First Reserve Fund X, managed by First Reserve Corp. of Greenwich, Conn. That fund is slated to close at the end of March with $2.2 billion. It will take controlling positions in energy companies, with a focus on the services and manufacturing sectors for natural gas.

CalPERS was an investor in two previous funds managed by First Reserve. The firm’s $1.84 billion 1992 fund has posted gains of 26%. CalPERS invested $35 million in that fund. The firm’s 2001 fund, a $1.38 billion fund that CalPERS committed $125 million to, is still in the red. It has lost 4.6% of its value.

In total, CalPERS’ private equity portfolio is worth $7.7 billion, or 4.7% of the pension plan’s total assets. Nearly 40% of the pension fund’s private equity portfolio sits in corporate restructuring funds, another 20% is dedicated to expansion-stage capital. Venture capital funds account for one-fourth of CalPERS’ private equity allocation.

Sacramento, Calif.-based CalPERS, the nation’s largest public pension fund, manages a $164 billion investment portfolio.