CalPERS sets aside another $500 mln for emerging managers

  • Added $500 million to emerging PE managers in past year
  • Palladium graduates to transition manager with $75 mln mandate
  • Palladium fourth of five planned transition managers in PE

California Public Employees Retirement System set aside an additional $500 million for new private equity managers while also graduating a GP from its emerging manager program.

The $341 billion retirement system started its emerging managers program in 2012, creating a path for newer, usually smaller firms to work with CalPERS.

It expanded that effort by creating a separate transition manager program in June 2015, aiming to help GPs that outgrew the emerging manager program but were still too small to break into the main CalPERS portfolio.

“We have been putting out new money and our programs continue to evolve, creating new investment opportunities,” Diego Carrillo, investment manager, said at CalPERS’s December investment committee meeting.

“In private equity, we recently closed on a $500 million mandate, bringing the equity total to $850 million for that program. We’ve extended the definition to include third institutional fundraise and broadened the parameters to include co-investment opportunities.”

The system has $3.7 billion in total assets allocated to 222 PE emerging managers through a fund of funds managed by Grosvenor Customized Fund Investment Group, documents from the meeting show.

CalPERS also added Palladium Equity Partners to its roster for transition managers, committing $75 million to the firm in Q3. The system had previously funded three transition managers in PE, committing $75 million each to Clearlake Capital Group, Siris Capital Group and Valor Equity Partners.

The transition manager program is aimed at GPs who are raising their fourth, fifth, or sixth funds, and creates a direct relationship overseen by CalPERS Investment Office staff, rather than working through the Grosvenor fund of funds.

CalPERS aims to commit $50 million to $300 million per manager and had planned to fund five PE transition managers by 2020.

The emerging and transition managers are also a prime source of diversity for CalPERS, which reported that 44 of the 54 diverse-owned external managers that work with the retirement system are part of those programs.

Action Item: More about CalPERS’s recent progress on its emerging manager goals: