CalPERS eyes consolidation as StepStone quits

The $334bn pension fund could end up with one real assets consultant down the line, as it look to reduce the ‘complexity and expense’ of its arrangements.

California Public Employees’ Retirement System’s investment committee will weigh its options for how to replace StepStone Group as its infrastructure consultant in a meeting next week after the company ended its contract two years early.

StepStone resigned as consultant to the US pension’s $3.7 billion infrastructure programme, according to agenda materials for the meeting. The company’s contract began on 1 March 2015. John Osborn, CalPERS’ spokesman, confirmed StepStone’s resignation but declined to comment further.

CalPERS must hire a new consultant before StepStone exits on 30 September. StepStone will begin infrastructure consulting for another firm in October, according to the agenda.

StepStone declined to comment for this story.

The investment committee said it is weighing a few options. First, CalPERS could issue a RFP to find a new consultant and hire an interim firm until a new contract is negotiated. However, the pension said this could be costly and disrupt investment processes.

Another option is to reach out to firms consulting CalPERS for other asset classes. The two it mentioned were Meketa Investment Group, which is currently consulting for private equity and previously was infrastructure consultant from 2010 to 2014, and Pension Consulting Alliance, CalPERS’ current real estate consultant.

CalPERS’ investment committee said in the agenda this is an opportunity to reduce the “complexity and expense” of its consultants by aligning contract terms for infrastructure and real estate consultants. The investment committee said that aligning consulting contracts between the asset classes could lead to a “consolidated real assets” request for proposals in 2022 that would cover real estate, infrastructure and forestland. It is reserving the option to award contracts to individual firms for each asset class.

The infrastructure consultant contract period expires on 29 February 2020, but the investment committee recommended extending this to match the contract for real estate, which ends on 31 March 2022.

In April, CalPERS announced plans to manage a single portfolio made up of infrastructure, real estate and forestland assets, a programme worth $36 billion. Its infrastructure portfolio amounts to 1.2 percent of CalPERS’ total assets. It returned a net 9.92 percent last year, compared with 7.6 percent returned by real estate.