California politicians reschedule emerging manager hearing

A follow-up hearing on CalPERS’ and CalSTRS’ efforts around emerging manager programmes that will be led by California State Senators Curren Price and Gloria Negrete McLeod has been rescheduled for January, 2013.

Two California State senators have rescheduled a follow-up hearing for early 2013 to discuss the emerging manager programmes at the state’s public workers’ and teachers’ retirement systems, Senator Curren Price spokeswoman Fahizah Alim told Private Equity International.

The hearing, intended as a follow-up to a 13 September event hosted by Senators Price and Gloria Negrete McLeod, had been scheduled for 10 October, according to a report on McLeod’s website. Alim was unsure as to why the event had to be rescheduled.

The hearing will now be held on 11 January, 2013 at Los Angeles City Hall, Alim said. McLeod’s office could not be reached for comment. 

CalPERS has faced criticism for what some see as the system’s retreat from its emerging manager strategy in recent years. Although CalPERS is still one of the most prominent limited partners in the emerging manager community, the $243 billion retirement system’s commitment pacing has declined since growing its emerging manager private equity programme to a peak of $1 billion from 2006 to 2010. 

The programme, known as the Capital Link funds, had been launched and managed by Centinela Capital Partners. CalPERS removed Centinela from its contract earlier this year after the fund of funds accused the system of racial discrimination and breach of contract. 

Centinela claimed that CalPERS had promised the firm a $100 million re-up to a third Capital Link fund if Centinela founding partner Cesar Baez was removed. Allegedly, CalPERS had grown concerned with Baez's relationships with “Latino” placement agents accused of wrongdoing involving CalPERS, even though neither Baez nor Centinela was ever accused of wrongdoing. CalPERS awarded the $100 million re-up to Credit Suisse last year, and handed over management of the Capital Link programme to the bank’s fund of funds group after firing Centinela.

After the 13 September hearing, CalPERS chief investment officer Joe Dear wrote to Senator Price asking for help in maintaining friendly ties with the emerging manager community. 

“We have concerns that the continued focus and breakdown of performance by segment or fund will only lead to further mistrust and divisiveness. We would appreciate your help in trying to find a mutual understanding with the emerging manager community on these issues,” Dear wrote.

At the earlier hearing, Dear explained that although CalPERS remains committed to its emerging manager programme, the retirement system’s restructuring of its private equity portfolio has led to difficult choices.

“It’s not my job to make managers happy,” Dear said. “I recognize our restructuring work and our focus on performance have caused some concern among the emerging manager community … We’re going through each strategy and asking if managers are helping us achieve our target or not, and making very tough decisions not to invest in new programmes from those managers, or in taking our money back and redeploying it elsewhere in the portfolio.”

CalPERS has since announced plans to host an emerging manager workshop, scheduled for early December, which will allow firms to gain insight into how the retirement systems assess emerging managers and their investment proposals.