Calpers set to restructure its PE programme

Sofia Karadima
19 March 2019

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California Public Employees Retirement System (Calpers), the $355.8bn pension fund, has decided to commit to late-stage venture and growth capital investments, as well as in long-term investments in core economy companies, as part of its private equity business model.

Calpers' investment committee held a meeting on 18 March, where it discussed the private equity business model review.

The review was structured in four sections labelled "pillars". The first pillar was about emerging managers and the second about traditional partnerships.

Pillars III and IV discussed the scaling of the plan's private equity exposure, migrating to a more cost-effective model, and improving alignment of interest.

Pillars III and IV were subsequently recommended for adoption.

Pillar III suggested taking advantage of companies by staying private for longer. It also advises that investments in technology, life sciences and healthcare lead to faster growth.

Pillar IV focuses on long-term holdings of core economy companies with positive cash flows, and reducing asset turnover expense.

The review of the two pillars is also expected to bring operational transparency to staff greater than that currently received from co-mingled funds, as well as public transparency identical to existing private equity funds.

Calpers has recently issued a tender notice searching for a private equity investment board consultant and a general pension board consultant.

The new contract is expected to start in July 2020. It would be three years long, with the option to be extended for up to two more years.

The pension fund has invested 7.7% of its portfolio to private equity as of August 2018. Recent commitments to private equity include Permira Growth Opportunities I, Vista Equity Partners Fund VII, Carlyle Europe Partners V and The Triton Fund V.