CalPERS considers merging PE with public equities

The US’s largest public pension wants to follow the example of its large Canadian counterparts.

California Public Employees' Retirement System is planning to merge its private equity allocation with its global equity allocation to “focus the management of the allocation […] at the total fund level,” according to documents published by the pension.

The $315 billion fund – the largest public pension in the US – allocates 8 percent to private equity, alongside a 46 percent allocation to global equities. Under the revised asset mix, private equity would sit in a “growth” bucket with public equities, accounting for 54 percent of the pension's assets.

CalPERS' move would follow a number of other significant pension funds in pooling their public and private equity strategies. Two large Canadian funds – Ontario Teachers' Pension Plan and Canada Pension Plan Investment Board – have combined allocations, as has the New Zealand Superannuation Fund, according to the CalPERS presentation that will be discussed at an investment committee meeting on Wednesday.

Private equity will not be eliminated from CalPERS' asset mix and remains “an important part of the investment portfolio,” according to the presentation.

Last week CalPERS announced that Réal Desrochers, who has been managing investment director of its private equity programme for the past six years, was to leave the pension on 7 April.

CalPERS, which has about 8.5 percent of its total assets, or $27 billion, in private equity, said in a statement on Wednesday that Desrochers is taking a position with a large overseas bank whose name was undisclosed.

Sarah Corr, an investment director in private equity at CalPERS, will become the interim head of the programme, CalPERS said. It is unclear whether the search for a permanent replacement has started.