After 23 years of playing the private equity market, the California Public Employees Retirement System (CalPERS) has taken home $5 billion in profits, said Rick Hayes.
Hayes, manager of the fund’s private equity portfolio, oversees nearly $20 billion worth of investments. It’s largely a buyout investor, with almost 40% of its holdings, or $7.5 billion, committed to funds dedicated to corporate restructuring. One-quarter of the portfolio, or $5 billion, sits in venture capital funds.
If the fund’s investment committee votes to accept a proposal to move its portfolio of corporate governance funds under Hayes’ umbrella, his portfolio might grow by an additional $2.6 billion.
Corporate governance funds invest in public companies, take majority ownership of them and hope to turn a profit by using corporate governance strategies such as appointing more independent directors to the company’s board. They are structured like private equity funds, with both general and limited partners.
When CalPERS started investing in corporate governance funds, in 1996, it put them under the private equity umbrella. Soon after, CalPERS’ corporate governance group took it over. Now, with so many initiatives underway, the corporate governance staff is looking to reduce its workload and return the portfolio to the private equity group.
“It’s an operational thing,” said CalPERS spokesman Brad Pacheco.
The proposal is an information item on the agenda, meaning that the investment committee will discuss the issue, weigh the opinions of the board and the staff, and consider taking action on the issue at a later date. If, and when, that might happen is unknown.
Perhaps making Hayes’ case even stronger will be the fact that CalPERS reported a 23.3% gain for the 12 months ended Dec. 31, bringing its assets under management to $161.1 billion. Its public equities portfolio performed strongest, clocking in returns of 24%, while the pension fund’s fixed income portfolio rose by 19.8 percent. CalPERS’ private equity program reported gains of 1.8 percent. To clear its actuarial hurdles, CalPERS must post gains of 8.25% annually. Sacramento, Calif.-based CalPERS is the nation’s largest public pension fund. It represents employees from 2,400 state agencies.
CalPERS is the nation’s largest public pension fund.