CalPERS explores filling the lending gap in wake of SVB collapse

“The word is out that we can be a strategic partner and agile in providing solutions for balance sheet restructuring or a provider of patient, long-term capital,” said CIO Nicole Musicco.

California Public Employees’ Retirement System could take advantage of the collapse of Silicon Valley Bank as it looks to increase its focus on direct investing and lending.

The dramatic fall of Silicon Valley Bank last week has led to long-term questions about where tech-focused fund managers and portfolio companies may find financing in a tumultuous marketplace. CalPERS, the largest US pension system, could look to capitalise – it recently made multiple moves to increase its focus on direct investing as it revamps its private equity program.

Discussion about Silicon Valley Bank occurred at the system’s investment committee meeting held on 13 March. Affiliate title Buyouts watched a webcast of this meeting.

CalPERS investment staff received several inbound calls, and reached out to others, to share the system’s views on the market in the wake of Silicon Valley Bank’s collapse, according to CalPERS CIO Nicole Musicco.

“The word is out that we can be a strategic partner and agile in providing solutions for balance sheet restructuring, or a provider of patient, long-term capital,” Musicco said.

Musicco said investment staff would discuss with the committee in executive session some possible opportunities that could result from the Silicon Valley Bank event.

“My phone continues to buzz,” Musicco said.

CalPERS also has $67 million in exposure through investing in Silicon Valley Bank, according to Musicco.

The $442.4 billion system has recently taken steps to develop its direct investment program.

Investment staff created an internal underwriting committee to consider direct investments, which was discussed in the $442.4 billion system’s November investment committee meeting.

CalPERS also hired Anton Orlich to head its private equity programme after first announcing him as the system’s director of growth and innovation. Musicco touted Orlich’s experience in helping the system develop its direct investing strategy in November.

Musicco has emphasised increasing the system’s exposure to private equity, stating the system suffered a “lost decade” of returns by underallocating to the asset class.

The system deployed $17 billion to private equity in 2022, according to a presentation from adviser Meketa, scheduled for the 13 March investment committee meeting.

The system made $4.8 billion of commitments in the second half of 2022 to co-investment and customised investment accounts, described by CalPERS as an investment structure where it is the only investor.

CalPERS also announced it had appointed Daniel Booth as deputy chief investment officer for private markets.

This article first appeared on affiliate title Buyouts.

To access more CalPERS insights, analysis and data, click here