CalPERS projects $5.8 bln in PE commitments

  • $295 bln pension projects more co-investments, separate accounts
  • System also expects to increase credit exposure
  • Value of PE portfolio drops to $28.8 bln

The California Public Employees’ Retirement System expects to commit $5.8 billion to private equity during the fiscal year ending June 30, 2016, according to a recent private equity report.

The report, which the $295 billion pension included in its November 16 meeting materials, forecasts commitments for the next four fiscal years. CalPERS expects to commit another $5.8 billion for fiscal 2016-17, $8.8 billion for 2017-18, $8.9 billion for 2018-19 and $7.2 billion for 2019-20, according to the report.

Approximately three-quarters of the pension’s 2015-2016 allocation will go to buyouts, with the remainder allocated across credit, opportunistic, growth/expansion and co-investments. The following year, CalPERS expects to put approximately $2.6 billion in credit-related investments, which currently account for roughly 12 percent of its overall portfolio.

Overall, CalPERS expects to commit $23.7 billion to buyouts between 2015-16 and 2019-20, or about 65 percent of the $36.5 billion it plans to commit across all its strategies in the next five years.

CalPERS will direct a significant amount of its future commitments to customized accounts and co-investments as it reduces the costs and complexity of its private equity program, the report said.

The pension has been considerably more active on those fronts over the last year, doubling the size of its customized account portfolio from $700 million to $1.4 billion as of June 30. The pension also expanded its co-investment program by $200 million to $1.5 billion.

In June, CalPERS said it would reduce its number of relationships with private equity managers from roughly 100 to around 30. The pension has increasingly focused on directing bigger allocations to fewer commitments.

The retirement system recently committed $1 billion to CVC Strategic Opportunities Compounding Capital LP, a new CVC Capital Partners vehicle for investments in stable, low growth companies, the Financial Times reported earlier this year. CVC is pitching the fund with a 15-year fund life and is offering LPs a below-market management fee.

CalPERS also committed to Blackstone Group credit affiliate GSO Capital Partners in September, with a re-up to the firm’s latest Energy Partners fund. CalPERS is a major Blackstone backer, having committed more than $1.2 billion to the firm since the start of the year, according to pension documents.

Action Item: See CalPERS’ most recent PE report here:

CalPERS, commitments, 2015, 2016, 2017

Photo: CalPERS’ headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker