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LP Scorecard: An Analysis of CalPERS First-Time Funds

European focused vehicles make up half of this week’s scorecard, which takes a look at the $251 billion California Public Employees’ Retirement System’s top ten investments in first-time buyout funds. Schroder Ventures’s spin-out Permira takes the top spot with its maiden independent vehicle, Permira Europe I, raised in 1997, which posted an IRR of 74.5 percent and investment multiple of 2.6x, according to CalPERS private equity investment performance figures as of June 30, 2012.

CalPERS has backed some 20 first-time buyout funds in its current portfolio of private equity investments, ranging from the most mature, the 1996 vintage CVC European Equity Partners LP, which comes in fifth place in this scorecard, to the youngest, the 2008 vintage Huntsman Gay Capital Partners Fund LP, which narrowly misses an appearance in this top ten, coming in twelfth place in the ranking.

Altogether, CalPERS has backed some 275 funds spanning vintages 1991 to 2012, including corporate restructuring; expansion capital; venture capital; credit related and opportunistic investments. The pension fund also has exposure to the asset class through various funds of funds.

Second place in this top ten goes to Italian buyout firm Clessidra, which was set up in 2003 by Fininvest’s former CEO Claudio Sposito. That 2005 vintage fund has posted a 50.3 per cent IRR and 1.29x multiple through June 30. Its successor fund, however, hasn’t attained as positive a performance, with its 2008 vintage Clessidra Capital Partners II LP posting a -14.3 percent IRR and 0.84x multiple to June, 30, according to CalPERS.

The 2001 vintage TowerBrook Investors I LP, a European and U.S.-focused buyout fund and successor to Soros Private Equity (which was part of Soros Fund Management) takes third place with a 40.3 percent IRR and 3x multiple. Other first time European-focused buyout funds to feature in this top ten include the 1996 vintage CVC European Equity Partners LP. CVC Capital Partners was originally the European arm of Citicorp Venture Capital and in 1993 negotiated a spinout from Citibank to form the independent private equity firm, CVC Capital Partners. CVC European Equity Partners LP was its first fund raised fully independent of Citibank.

Bridgepoint Europe I LP, a 2000 vintage, which takes seventh place, is another European-based spinout formerly known as NatWest Equity Partners.That team’s maiden vehicle also has proved a successful bet for CalPERs and has posted an IRR of 17.1 percent and multiple of 1.85x for the period.

According to research from alternative asset data provider Preqin, some 1,000 investors have expressed a preference for investing in first-time private equity funds. These investors have combined total assets under management of more than $30 trillion, with almost $1.3 trillion allocated to private equity. Of these LPs, Preqin finds that 299 will not invest in pure first-time funds and will only consider vehicles managed by a spin-off team. Fifty-three percent of active investors in first-time funds are based in North America, with 29 percent based in Europe and 10 percent based in Asia, according to Preqin.

Since its inception in 1990 to June 30, 2012, the CalPERS private equity program has generated $21.3 billion in profits. As of November 30, 2012, the pension fund’s actual allocation to private equity is $32.1 billion, or 13 percent of total assets, beneath its target allocation of 14 percent.

The top two performers in CalPERS’ total private equity portfolio are turnaround and recovery-focused buyout vehicles—the 2001 vintage T3 Partners II LP, which posted an IRR of 95.1 percent and multiple of 3.16x, and the 2002 vintage WLR Recovery Fund II LP, which recorded a 78.8 percent IRR and 2.35x multiple for the period. Permira Europe I took third place.

Prominent global private equity fund managers backed by CalPERS include Apollo Global ManagementBlackstone, Carlyle GroupColler Capital, Kohlberg Kravis Roberts & Co.Lexington Partners and TPG Capital. Among the pension fund’s European offerings are funds from Bridgepoint Capital, Candover (now Arle Capital) CVC Capital Partners and Permira. Venture capital fund managers that CalPERS has backed include Insight Venture PartnersKhosla Ventures and Pinnacle Ventures. The pension fund is also exposed to venture through its California Emerging Ventures funds, a series of four captive funds of funds.

Angela Sormani is a special correspondent for Buyouts in London.

10. Wayzata Opportunities Fund LLC

Vintage: 2006

CalPERS Commitment: $75 million

Multiple: 2.3x

IRR: 10.2 percent

 

9. ICV Partners I LP

Vintage: 2001

CalPERS Commitment: $10 million

Multiple: 1.61x

IRR: 13.4 percent

 

8. Central Valley Fund

Vintage: 2005

CalPERS Commitment: $40 million

Multiple: 1.43x

IRR: 14.9 percent

 

7. Bridgepoint Europe I LP

Vintage: 2000

CalPERS Commitment: $41 million

Multiple: 1.85x

IRR: 17.1 percent

 

6. Gleacher Mezzanine Fund I LP

Vintage: 2001

CalPERS Commitment: $45 million

Multiple: 1.5x

IRR: 20.1 percent

 

5. CVC European Equity Partners LP

Vintage: 1996

CalPERS Commitment: $50 million

Multiple: 2.6x

IRR: 22.9 percent

 

4. WLR Recovery Fund 1

Vintage: 1997

CalPERS Commitment: $50 million

Multiple: 3.64x

IRR: 35.2 percent

 

3. TowerBrook Investors I LP

Vintage: 2001

CalPERS Commitment: $55 million

Multiple: 3x

IRR: 40.3 percent

 

2. Clessidra Capital Partners I LP

Vintage: 2005

CalPERS Commitment: $68 million

Multiple: 1.29x

IRR: 50.3 percent

 

1. Permira Europe I

Vintage: 1997

CalPERS Commitment: $91 million

Multiple: 2.6x

IRR: 74.5 percent