CalPERS looking to simplify sprawling PE portfolio

The California Public Employees’ Retirement System has sent out two RFI’s seeking third-party help as the $200 billion pension looks to make its sprawling private equity portfolio more manageable.

A 2005 strategic program review…concluded that the number of general partner relationships managed by CalPERS staff needed to be reduced to a more manageable number. CalPERS, in an RFI seeking third-party managers.

The first mandate is to develop what the pension terms “New Investment Vehicles” (NIVs), managed by outside parties that will focus on specific areas within the private equity market. CalPERS describes in a statement that it expects the NIVs to be structured “as customized fund-of-funds” and will give the pension exposure to distinct segments, such as mid-market, domestic emerging managers, venture, clean energy and global emerging markets, as well as other niches.

The pension noted that it is looking for the NIVs to have a fund life of between seven and 12 years, with an investment period of two to five years. CalPERS also indicated that it expects to be able to make commitments to the underlying funds alongside the NIVs at reduced economics.

The second RFI issued is related to the pension’s desire to pass off a portion of its existing GP relationships to a third party. The mandate, dated today, says that following a strategic review conducted last year, the pension “concluded that the number of general partner relationships managed by CalPERS staff needed to be reduced to a more manageable number”.

The pension has already identified the GP relationships that it wants to continue to manage directly, and is now seeking “one or more third parties” to assume the oversight of the balance of its portfolio.

For each mandate, CalPERS has set a deadline of April 28 as the last date it will accept expressions of interest.

The public pension currently has one of the largest private equity portfolios among its peers, and has established relationships with firms such as Apollo Management, Oaktree Capital Management, Permira, Thomas H. Lee Partners, WL Ross & Co. and many others.

The pension has experienced some turnover in recent months. In October, CalPERS CIO Mark Anson left to join private investment manager Hermes, while Panda Hershey left in February to join TIAA-CREF. Leon Shahinian currently sits as head of the CalPERS alternative investment management programme.