In response to a letter sent by the California State Treasurer John Chiang to both the California Public Employees' Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) calling for greater private equity fee transparency, CalPERS said that it “applauded” Chiang for seeking greater disclosure.
In a statement sent to Private Equity International, CalPERS said it had “long fought for greater disclosure and transparency in the private equity industry.”
The fund said that over the last few years, it had brought in “strong leadership” in its private equity programme, renegotiated fees resulting in “significant savings”, and launched a system to track investments and fees. “Private equity is an important asset class for meeting our long term investment returns.”
CalPERS has $293 billion in assets, of which $16.6 billion is allocated to private equity.
In September, it reported that private equity returns averaged 12.2 percent on an annual basis over the past 10 years, and 12.3 percent over the last 20 years.
CalSTRS declined to comment. However the fund has generated returns of 13.5 percent over the life of its private equity investment programme since 1992, according to data on its website.
In Chiang’s letter to CalPERS and CalSTRS, he called for the two funds to work with his office to develop state legislation to require PE firms to disclose fees charged to Californian pension funds, as reported by PEI.
Industry trade association the Private Equity Growth Capital Council responded to the letter, noting that “private equity is the best performing asset class, net of fees and carried interest, based on median 10-year annualised returns for public pensions. The private equity portfolios for California pensions have done particularly well. These partnerships are based on an excellent alignment of each party’s interest with terms agreed upon upfront and extensive information provided to the pensions at the beginning and through the life of a fund.”