The California Endowment, Woodland Hills, Calif., a $2.5 billion fund established in 1996, after its July board meeting likely will begin searching for buyout fund and venture capital firms to begin fulfilling its 5%, or $125 million, allocation to alternative investments, said Alex Hsiao, senior investment manager. The searches were originally slated to begin in March, but the board voted to put them off because a replacement for Chief Executive Steven McKane had yet to be named.
“It’s probably going to be the latter part of the fourth quarter before we begin making the investments,” Mr. Hsiao said. “But we will hopefully get the green light to start searching at the committee meeting in July.”
Mr. McKane, who was named chief investment officer in November 1997, left in October 1998, just two months after gaining approval for an alternative investment allocation. “Like most other foundations, we look at it as an opportunity to enhance our returns,” Mr. Hsiao said.
The board has yet to name Mr. McKane’s replacement, but Mr. Hsiao, who joined the fund last September, said he expects the searches to move forward, albeit slowly. The fund board has set a two-to-four year investment time frame, but is not wedded to those dates.
The board chose to focus on buyouts and venture capital funds and stay out of the liquid side of alternatives, such as hedge funds and arbitrage investments, because it wanted to avoid the volatility of those markets, he said.
The endowment has retained Cambridge Associates to help identify investment partnership opportunities and to assist with screening candidates.
The fund’s asset allocation target is 50% U.S. equities, 25% fixed income and 25% non-U.S. equities, which includes a 5% emerging markets allocation.
The endowment was launched by Blue Cross of California to fulfill an incorporation requirement in its conversion from a not-for-profit to a for-profit company.