CalPERS commits nearly $1bn to PE in July

The latest monthly report from the largest US pension fund shows its commitment to two private equity funds totalling almost $1bn, while it decided to forego committing to a KKR vehicle.

Sacramento-based California Public Employees’ Retirement System (CalPERS) committed nearly $1 billion to private equity in the month of July, according to the agenda for its 19 September board meeting.

During the month, CalPERS committed $500 million to Cerberus CP Partners II and €440 million ($494.9 million) to Permira VI.

Cerberus CP Partners II is the second CalPERS separate account focused on opportunistic investments managed by New York-based Cerberus Capital Management, which manages $30 billion in assets. The first one, Cerberus CP Partners, received a $600 million commitment from CalPERS in 2013. Cerberus was unavailable for comment.

According to CalPERS, Cerberus CP Partners has drawn $593 million from Cerberus CP Partners and distributed $30.7 million back to CalPERS. The pension fund also indicated this separate account was generating a 34 percent net internal rate of return as of 31 March.

Permira VI, a fund managed by Permira Advisers, launched in February with a €6.5 billion target and a €7 billion hard-cap. According to PEI data, the fund has so far raised €6.3 billion from investors such as the Minnesota State Board of Investment, Oregon Public Employees’ Retirement System, Oregon State Treasury, the Pennsylvania State Employees’ Retirement System, Teacher Retirement System of Texas and Washington State Investment Board.

CalPERS had committed $269 million to the previous Permira fund, Permira V, in 2014, and $284 million to Permira IV in 2006. According to CalPERS data, Permira IV was generating a 7.1 percent net IRR as of 31 March. Canada Pension Plan Investment Board, Portfolio Advisors, and AlpInvest Partners committed to Permira IV and V.

According to PEI data, both Cerberus CP Partners II and Permira VI have begun drawing down capital in July.

The monthly report from CalPERS also indicates the $301 billion pension fund conducted due diligence on KKR Americas Fund XII, which launched in 2015 targeting $12 billion, but ultimately decided not to do so. KKR’s America-focused funds invest in consumer, chemicals, metals and mining, energy and natural resources, financial services, healthcare, industrials, media and communications, retail, and technology sectors. The firm typically invests between $150 and $600 million of total equity in the region.

A CalPERS spokesman declined to explain this decision. KKR Asian Fund II, which closed in 2013 on $6 billion, is the most recent KKR fund CalPERS committed to. It committed $500 million to this vehicle. CalPERS last committed to an Americas-focused fund in 2006, with a $400 million cheque to KKR 2006 Fund.

KKR was unavailable for comment.

As of 13 September, CalPERS’ private equity portfolio stood at $26 billion, or 8.6 percent of the total $301 billion fund. This is below its 10 percent target allocation to the asset class.

At a board meeting last fiscal year ended 30 June, it authorised $3.9 billion in commitments to 18 opportunities with 12 different GPs for the fiscal year ending June 2017, as reported byPrivate Equity International. It also anticipates committing $36.5 billion in private equity in the next five years until the end of June 2020.