CalPERS splashes market with $1 bln private equity portfolio

The California Public Employees’ Retirement System shook up the industry earlier this year when it said it would dramatically slash its number of private equity relationships.

Now it appears that CalPERS, which had total assets of $293 billion as of Jan. 31, has started the process of chopping down its bulky private equity portfolio.

It is selling about $1 billion worth of its private equity portfolio on the secondary market, two sources said. UBS is running the sale, sources said. It’s not clear which specific funds are included in the sale, although all are private equity fund interests.

Secondaries Investor reported on the sale earlier.

The trend over the past few years has been for a large secondaries buyer to absorb entire portfolios. For example, Ardian acquired a portfolio of stakes in more than 300 funds valued at $1.3 billion from GE Capital last year.

However, CalPERS’ portfolio has an “eclectic” mix of funds that may not be attractive for a single buyer, one source said. “It’s a mixed bag – some larger positions, some tail end, mixed quality,” the source said.

The system has sold private equity in the past, including bringing a $1.5 billion portfolio to market in 2012 in a sales process also run by UBS. CalPERS sold $800 million worth of private equity fund stakes to AlpInvest Partners in 2011.

The system, which has more than $43.1 billion of exposure to the asset class, is selling the stakes for “portfolio management” reasons, one source said. Many large institutions in recent years have gone to the secondaries market to sell off non-core relationships and cut down on the size of their private equity portfolios.

CalPERS made its private equity reduction plans public in an interview with the Financial Times in January. Chief Investment Officer Ted Eliopoulos said the system wanted to cut its number of private equity managers by two-thirds, to 120 or fewer, according to the article. Eliopoulos said the final number could fall below 100, the article said.

Like other big LPs, CalPERS has been committing more money to fewer managers – working only with the best performing GPs. This helps to cut down costs by reducing the number of managers paid fees.

Joe DeAnda, a spokesman for CalPERS, declined to comment.