Firms & Funds

CalPERS PE portfolio returns 16.1 pct, boosts pension performance

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CalPERS, private equity, pension fund, Ted Eliopoulos
CalPERS CIO Ted Eliopoulos and CalSTRS CIO Christopher Ailman, with moderator Danielle Gray of O’Melveny & Myers, discuss inclusion, at the 2017 CalPERS & CalSTRS Diversity Forum on May 10, 2017. Photo by Sam Sutton, Buyouts.
  • Assets Under Management: $351 bln
  • PE investments: $25.9 bln
  • PE target allocation: 8 pct
  • PE investment return: 16.1 pct
  • Why this is important: CalPERS is rolling out its new investment platform

California Public Employees’ Retirement System’s $25.9 billion private equity portfolio returned 16.1 percent in the year ended June 30, giving a lift to the pension’s overall investment portfolio, which returned 8.6 percent.

The performance helped lift the $351 billion retirement system’s funded status three percentage points to 71 percent, compared to the previous fiscal period, according to preliminary results released earlier today.

“I am pleased we were able to exceed our expected rate of return based on our strong performance in the private and public equity portfolios,” said Ted Eliopoulos, CalPERS’s outgoing chief investment officer.

Still, CalPERS’s PE returns for the year fell short of its benchmark by 250 basis points. In comparison, infrastructure returned the highest with 20.6 percent, beating its benchmark by 1,416 basis points.

All in as of June 30, the pension fund has returned 8.1 percent over five years, 5.6 percent over 10 years, 6.1 percent over 20 years and 8.4 percent over 30 years.

Returns for real estate and private equity reflect market values through March 31, 2018.

CalPERS is in the process of rolling out its new PE platform, CalPERS Direct, intended to bypass funds and secure investments in high-performing private companies at a lower cost.

Under the program, an outside entity would control two separate evergreen funds for private investments.

CalPERS’s push to go direct comes as some groups expect private equity returns to fall.

In a presentation to Los Angeles County Employees Retirement Association in May, Meketa Investment Group lowered its expected returns from private equity to 8.8 percent over the next decade. Last year, the firm had estimated that PE would return 9.3 percent between 2017 and 2027.

Abu Dhabi Investment Authority also recently reported it expected PE returns to sag in 2018 and beyond.

Action Item: Read more on CalPERS PE program here https://bit.ly/2KV36pi