CalPERS pays out biggest carried interest check to Apollo

  • Biggest carry check went to Apollo Credit Opportunity Fund I
  • Pension has paid a total of $3.4 bln in carry to active funds since inception
  • Has collected $24.2 bln in realized net profits

Apollo Global Management is a profit-generating machine according to fresh data released by the California Public Employees’ Retirement System Tuesday.

A single fund managed by the firm collected the highest individual carry payment, based on a breakdown of carry paid by CalPERS to active managers since inception. Apollo Credit Opportunity Fund I LP has received $298.9 million in carried interest from CalPERS since inception.

Fund I closed on $1.5 billion in 2008, including a $1 billion commitment from CalPERS, to invest in debt during the financial crisis. It was generating a 27.6 percent net internal rate of return and a 3x multiple as of March 31, 2015, according to CalPERS performance data.

CalPERS recently established a system called Private Equity Accounting and Reporting Solution (PEARS) to better track how much carried interest it pays to its GPs. The pension established the system amid criticism that it hasn’t been tracking the figure.

While Apollo collected a big carry check on the fund, CalPERS itself realized around $2.8 billion in distributions on its $1 billion commitment, with almost $79 million of remaining value in the fund as of March 31, according to CalPERS performance data.

Apollo was widely lauded for making big–some said highly risky–debt bets in the downturn as other firms slowed or stopped investing. The moves paid off as the economy gradually recovered.

All told CalPERS has paid out $3.4 billion in carried interest to active general partners since the inception of its PE program in 1990, while collecting $24.2 billion in realized net profits during the same time period, the system said Tuesday. It paid $724.4 million of that carried interest to Apollo for the performance of its active funds, according to a calculation based on CalPERS data.

The carry data released by CalPERS does not include inactive investments such as those the pension fund already fully liquidated or sold on the secondary market. Staff’s ability to access data from funds no longer in the portfolio is limited, according to CalPERS spokesman Joe DeAnda.

“We felt the best use of our time and resources was to focus on active funds – 98 percent of cash adjusted asset value is represented,” DeAnda said. “Moving forward we will be consistent in that approach.”

The data show private equity is delivering on its promises, according to James Maloney, spokesman with industry lobbying group Private Equity Growth Capital Council.

“The data released by CalPERS today show the success of its private equity program, and is excellent news for California’s public employees, pensioners, and the state budget. It also highlights the strong partnership between private equity and pensions; a partnership based on an alignment of each party’s interest,” he said.

Action Item: Check out the CalPERS data release.