CalPERS allocating $11bn to new and transition GPs

The country’s largest pension system established a transition manager program for firms in between its emerging manager platform and its pool of larger established managers.

The California Public Employees’ Retirement System (CalPERS) plans to allocate $11 billion across asset classes to emerging and transition managers by 2020, the pension system said Thursday.

CalPERS’ Transition Manager Program will commit as much as $7 billion across asset classes to firms that are not large and experienced enough to compete against more established firms for direct investment mandates. The firm defines transition managers as “firms that have demonstrated early stage success, either within CalPERS’ Emerging Manager Program or elsewhere.” Commitments will be between $50 and $300 million in real estate and private equity for the programme, which was announced in June 2015.

Submissions for the transition manager programme will be accepted beginning July 2017 and the selection process could take up to a year, according to the pension’s meeting materials. The pension system is seeking another $4 billion in commitments to its Emerging Manager Program in the same period.

“Our objective for investing with emerging and transition managers is to generate appropriate risk-adjusted investment returns by identifying early funds with strong potential for success; accessing unique investment opportunities that may otherwise be overlooked; and cultivating the next generation of external portfolio management talent,” said Laurie Weir, CalPERS’ investment director for targeted investment programs, in a statement Thursday. 

Both the emerging and transition manager programmes seek to provide pathways for managers to grow and eventually compete with CalPERS’ pool of larger, established managers. The pension system said last year that it would reduce that pool of existing manager relationships across asset classes as it seeks to reduce the risk, cost and complexity of its portfolio.

Separately, CalPERS plans to commit up to $4 billion through its emerging manager program by 2020, including $500 million to real estate, according to a report from its board meeting last week. Across asset classes, the pension system currently has $9.4 billion invested with 301 emerging managers.

CalPERS manages $294 billion in assets.