CalPERS replaces infrastructure consultant StepStone with Meketa

  • StepStone resigned as infra consultant, effective at the end of September
  • CalPERS launched infra program in 2007
  • CalPERS consolidated infra, real estate and forestland portfolios in recent years

California Public Employees’ Retirement System’s board on Sept. 18 chose Meketa Investment Group to replace StepStone Group as its infrastructure consultant.

StepStone resigned from its contract with the $336.2 billion public pension fund effective Sept. 30, according to a letter included in CalPERS meeting materials.

It’s unclear why StepStone resigned. The firm had more than two years left on a five-year contract that paid out $121,000 annually.

Meketa will consult with the CalPERS board on its $2.6 billion infrastructure portfolio through the end of the contract, on similar terms, through February 2020.

Rather than initiating a new RFP, which would have likely been costly and time consuming, CalPERS staff recommended the board tap either Meketa or Pension Consulting Alliance (PCA) to fill the retirement system’s “critical need” for a consultant without an interruption of service, Investment Director Kit Crocker said at Monday’s meeting.

Meketa is CalPERS’s private equity consultant, having taken over the role following PCA’s resignation from its contract earlier this year. PCA maintains a separate contract to consult on the retirement system’s real estate program.

CalPERS selected StepStone as its infrastructure consultant through a competitive bidding process in 2015. Meketa, which had been CalPERS’s infrastructure consultant between 2010 and 2014, placed second in that process.

StepStone declined to comment. CalPERS did not respond to a request for comment.

CalPERS has been consolidating its discrete portfolios in real estate, infrastructure and forestland assets for a number of years. The total portfolio was valued at roughly $36 billion as of May 31, according to its website.

“Part of our logic on consolidating [consultants] is that this mimics and mirrors the consolidation of our real assets program. Historically, that was regarded and managed and sort of treated as three separate programs — infrastructure, forestland and real assets,” Wylie Tollette, CalPERS Chief Operating Investment Officer, told the board on Monday. “Over the last couple years we consolidated that into one real assets program.”

CalPERS launched its infrastructure program in 2007. The portfolio includes CalPERS’s stake in Desert Sunlight Investment Holdings LLC, a pair of power generation facilities located near Palm Springs. CalPERS also owns a 10 percent stake in Indiana’s Toll Road through the program.

The infrastructure portfolio returned 9.9 percent during the 2016-2017 fiscal year, beating its benchmark by nearly 3.5 percentage points, according to a press release.

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Calpers headquarters in Sacramento, California, on October 21, 2009. Photo courtesy Reuters/Max Whittaker