Apollo shares boost CalPERS’ PE portfolio

Apollo’s stock, which falls under the growth and expansion strategy in the pension plan’s private equity portfolio, grew nearly 75% in the year ended 30 June.

Publicly-listed private equity firms often complain of their stocks being undervalued, but for the California Public Employees’ Retirement System, they have been a boon in the past year.

Although CalPERS’ private equity portfolio fell behind its benchmark in the year ended 30 June, the performance was boosted by the pension plan’s exposure to the stock of Apollo Global Management.

CalPERS’ private equity programme posted a 13.9 percent one-year return as of 30 June, below its policy benchmark’s 20.3 percent, according to a recent report published CalPERS’ private equity consultant Meketa Investment Group.

Buyouts, which represent the bulk of the portfolio, or nearly 60 percent of the net asset value, returned 14.8 percent.

Meanwhile, the plan’s growth and expansion bucket, which represents about 17 percent of the private equity NAV, returned 22.6 percent and was the best performing strategy within private equity.

“Growth/expansion investments generated the strongest one-year return at 22.6 percent, mostly attributable to the appreciation of the programme’s investment in a fund management company,” the report noted.

Joseph Jelincic, a member of CalPERS’ board, asked Meketa’s principal Steve Hartt during Monday’s investment board meeting to expand on the note.

“CalPERS has investments in some private market managers that are publicly listed and there’s one particular manager that’s had a substantial stock price increase that is still held within the portfolio,” Hartt responded, referencing Apollo.

Stock in Apollo, which is about to close the largest private equity fund in history at nearly $25 billion, rose by 74.5 percent to $26.45 a share during CalPERS’ fiscal year ended 30 June. Additionally, CalPERS also sold a significant chunk of its Apollo shares in the first quarter of the 2017 calendar year, based on filings with the Securities and Exchange Commission, although it is unclear how much it sold them for.

CalPERS declined to comment.

According to SEC filings, CalPERS still owns shares in Apollo, Blackstone, the Carlyle Group and Ares Capital Corporation. CalPERS owned 17 million Class A shares of Apollo stock as of 30 June. There were worth $537.5 million as of Wednesday’s trading price. Shares of Blackstone, Carlyle and Ares grew by 35.8 percent, 22.1 percent and 14.6 percent, respectively, in the 12 months ended 30 June.

CalPERS’ private equity portfolio was valued at $25.9 billion as of 30 June.

CalPERS Strategy Performance:

 NAV ($MM) 1 Yr 3 Yr 5 Yr 10 Yr
 Buyouts  15,349  14.8 9.2 12.2 10.1
 Credit  3,034  10.5 1.1 8.1 10.2
 Growth/Expansion  4,367  22.6 10.8 12.8 8.6
 Opportunistic  2,067  11.7 16.6 13.4 6.7
 Venture  982  -8.9 -1.6 4.7 3.1
 CalPERS PE Programme  25,892  13.9 8.1 11.5 9.3
 Policy Benchmark*  20.3 9.9 13.7 13.0


*The current policy benchmark is a blended benchmark comprised of two-thirds weighting to the FTSE US TMI return and one-third tot he FTSE AW ex-US Index return + 300 basis points, lagged by one quarter.