Majority of CalPERS GPs use ILPA template

Roughly three-quarters of California Public Employees’ Retirement System’s core private equity partnerships are using the Institutional Limited Partners Association’s template for fee and expense reporting, according to presentation documents the retirement system published on Monday.

The ILPA template, which the industry group unveiled this year, standardizes how fund managers report fund- and portfolio-company-related fees and expenses. ILPA offered the template as a solution for limited partners that struggled to keep track of the variety of ways in which fund managers detail those fees and expenses.

CalPERS divides its $26.4 billion PE portfolio into its strategic portfolio, which includes its holdings in PE separate accounts and co-investments, and its legacy portfolio.

CalPERS, an important early backer of the template, wants all the strategic portfolio managers to use the template and provide data about carried interest within the next five years. The $300 billion system began asking managers to use the ILPA template this spring.

As of Q2, 74 percent of the funds in CalPERS’s strategic portfolio were using the ILPA template. A little more than half its legacy fund portfolio used the template.

CalPERS did not respond to a request for comment.

The ILPA template helps LPs track carried interest collected by PE managers. The public retirement system’s roster of GPs collected almost $490 million in carry, which represents the fund manager’s share of investment profits.

CalPERS also shelled out more than $206 million in management fees to its private equity managers in the 2015-2016 fiscal year, an investment report the pension released on Monday shows.

Separate from its direct commitments to PE funds, CalPERS’s funds-of-funds managers received $46 million in management fees and collected $49 million in carried interest, the report shows.

CalPERS last November first published information about how much carried interest its fund managers collected. That was several months after Chief Operating Investment Officer Wylie Tollette told board members carried interest is “not explicitly disclosed or accounted for. We can’t track it today.”

Shortly afterward, amid condemnation from board members like JJ Jelincic and California State Treasurer John Chiang, CalPERS compiled and released data outlining the amount of carried interest collected by its active managers. The initial report tallied carried interest collected by CalPERS GPs over the entirety of their funds’ life, rather than just its annual total.

CalPERS’s ability to track carried interest and other fees was a function of a new PE accounting and reporting system launched last year.

CalPERS had an 8.9 percent allocation to private equity as of June 30, a little more than a percentage point off its interim strategic target. The portfolio netted an 11.4 percent return on a 20-year basis.

Action Item: For more information about CalPERS and its PE portfolio, visit calpers.ca.gov/page/home