Someone Give These CalPERS Funds A Hug

The California Public Employees’ Retirement System didn’t want them. Secondary firms didn’t buy them. And so they’ve been banished to what the nation’s largest public pension fund calls its “Vista Portfolio”—a place where fund interests get managed “toward liquidation,” in the pension fund’s own phrase.

You can find the Vista Portfolio on the CalPERS Alternative Investment Management Program web site, although it’s easy to miss. It looks like many of the other limited partnerships listed, and (like the funds of funds in the CalPERS portfolio) you actually have to click through to see the underlying funds. All told, the portfolio consists of interests in 40 funds vintage 1992 to 2007 to which the pension fund committed more than $2 billion; general partners include diversified mega-firm The Carlyle Group, funds-of-funds manager Parish Capital Advisors and venture firm Technology Partners.

There have been two ways that funds end up in the Vista Portfolio, according to a source who’s familiar with its makeup. Many are among the interests that CalPERS had put up for sale on the secondary market in 2007 and 2008, but ended up holding on to. CalPERS had used the sale, which generated some $2.6 billion in proceeds, as part of a consolidation effort, to “eliminate some redundancy among funds,” “focus on top-quartile performers,” and other reasons, a CalPERS spokesman wrote in an e-mail.

Additional fund interests have been added to the Vista Portfolio since the secondary sale, after similarly being deemed non-core, according to our source familiar with the makeup of the portfolio. Notably, presence in the portfolio does not mean the end of CalPERS’s relationship with a particular general partner. Two funds in the portfolio are managed by long-time CalPERS partner Carlyle Group, in which the pension fund acquired an ownership stake. Nor does it means the funds have performed poorly: Five of the funds generated net IRRs of more than 20 percent.

It’s not clear whether CalPERS would consider a bulk sale of the Vista Portfolio. The spokesman wrote that the pension fund does not discuss strategy or secondary sales. Fourteen of the Vista Portfolio partnerships are vintage 2000 or older, suggesting secondary buyers would demand a substantial discount to NAV, a result which might be tough for the pension fund to swallow. CalPERS is not believed to have shown much interest in smaller, one-off sales.

For the moment, management of the portfolio has been outsourced to Sacramento, Calif.-based LP Capital Advisors, which handles the routine consents, amendments and approvals that go with managing older partnership interests to liquidity. StepStone Group, for example, would presumably need approval from CalPERS and other limited partners to complete its acquisition of funds managed by Parish Capital.

Below we pick out the 10 best-performing funds of the Vista Portfolio, to give a pick-me-up to these unwanted funds at this charitable time of year. All data comes from CalPERS and is current as of March 31.

1. Carlyle Realty Qualified Ptrs III LP

Vintage: 2001

Net IRR: 28.5%

Investment Multiple: 2.0x

Commitment: $50 million

2. Alta V Limited Partnership

Vintage: 1992

Net IRR: 25.5%

Investment Multiple: 2.4x

Commitment: $35 million

3. Golder, Thoma, Cressey & Rauner Fund IV

Vintage: 1994

Net IRR: 25.1%

Investment Multiple: 2.1x

Commitment: $25 million

4. Acon-Bastion Partners II LP

Vintage: 2006

Net IRR: 23.7%

Investment Multiple: 1.7x

Commitment: $70 million

5. APA Excelsior IV LP

Vintage: 1995

Net IRR: 20.2%

Investment Multiple: 2.0x

Commitment: $25 million

6. Carlyle Europe Realty Partners LP

Vintage: 2002

Net IRR: 16.4%

Investment Multiple: 1.8x

Commitment: $30.4 million

7. Lombard Thailand Partners LP

Vintage: 2001

Net IRR: 15.9%

Investment Multiple: 2.1x

Commitment: $75 million

8. Ethos Private Equity Fund III

Vintage: 1996

Net IRR: 12.9%

Investment Multiple: 1.7x

Commitment: $25 million

9. Lombard Asia III

Vintage: 2007

Net IRR: 12.7%

Investment Multiple: 1.3x

Commitment: $46.9 million

10. Falconhead Capital Partners II LP

Vintage: 2006

Net IRR: 8.5%

Investment Multiple: 1.3x

Commitment: $50 million