CalPERS To Review Entire Portfolio

Now that it has settled the yearlong battle for disclosure, the California Public Employees’ Retirement System (CalPERS) has moved on to other things. It has begun the tedious process of evaluating each of the investments in its $6.9 billion private equity portfolio. Today the Sacramento pension fund’s investment committee will review its California Emerging Ventures program, a $2.8 billion initiative managed by Boston’s Grove Street Advisors.

Launched in 1999, the California Emerging Ventures program was formed with the intention of raising CalPERS’ exposure to top-tier venture capital funds and also to invest in venture firms and high-tech companies based in California. When the program began, California Emerging Ventures was worth 9% – or $573 million – of CalPERS private equity program, which was worth $4.2 billion at the time.

The California Emerging Ventures portfolio today includes three fund-of-funds with investments in funds managed by Audax Group, Austin Ventures, New Enterprise Associates, New Mountain Capital, Oak Investment Partners, Reliant Energy Ventures, Solera Capital, Tallwood Venture Capital and VantagePoint Venture Partners. About 66% of the portfolio sits in IT funds, while 19% is dedicated to health care investments.

Since inception the California Emerging Ventures portfolio has lost 18% of its value, and Grove Street predicts the portfolio will continue to suffer if the economy is slow to rebound. Still Grove Street will continue to add new funds to CalPERS’ portfolio until 2004 when the last fund-of-funds is fully invested and begins to migrate some of the better-performing funds into CalPERS’ core private equity portfolio, thus removing itself as an intermediary.

CalPERS has not said whether it will continue the program after 2004. Grove Street’s presentation is on the board’s agenda as an information item, meaning that the board will review the program’s strategy and performance to determine whether it has met its targets and goals, but not vote on the program’s future.

Email Carolina Braunschweig