CalPERS fills private equity chief position after two years

The California Public Employees’ Retirement System has named Greg Ruiz managing investment director for private equity, filling a role that has been without a permanent occupant for two years.

Chief investment officer Ben Meng announced the appointment at the $360 billion pension plan’s 13 May investment committee meeting.

Ruiz will join the Sacramento-based pension system this summer, having most recently worked as principal at Palo Alto-based Altamont Capital Partners. Before that, he spent six years at FFL Partners, and previously worked at Goldman Sachs.

Ruiz steps into a role that has been vacant for more than two years following the resignation of Réal Desrochers in April 2017. Sarah Corr has been interim managing investment director since then.

Ruiz joins at a time when CalPERS’s private equity portfolio is undergoing significant changes as it reorganises itself into four pillars of investing, which include direct and fund investments and co-investments.

At a board meeting in November 2017, then-CIO Ted Eliopoulos said he had been “holding off on recruiting” a replacement for Desrocher until the pension plan had specified its new private equity strategy.

At Monday’s meeting, Meng also provided more information on CalPERS’s co-investment portfolio, which was suspended in 2016.

The pension system made its first co-investment in 1993, but at that time there was no systematic approach. In the early 2000s, it made one or two co-investments per year following an opportunistic approach. Then in the early 2010s, it started a dedicated co-investment programme, which started showing good returns from 2013 onward, when the total value of co-investments outstripped the programme cost.

The programme was suspended as part of the overall private equity review CalPERS has been undertaking, according to Meng.

Board member Margaret Brown said it would be helpful to document in a white paper or elsewhere why strategies are abandoned or accepted.

CalPERS needs a more consistent approach to co-investments, steady deployment and a diversified portfolio by vintage year, managers, sectors and industries, Meng said. “We need to continue to establish our credibility with the GPs, the manager community, by demonstrating and delivering a methodical and quick and consistent process, so that we can respond to co-investment opportunities in a timely manner.”

Meng said he hopes to come back to the board with more information in June or later, detailing whether CalPERS would co-lead or co-underwrite the investments, and what the testing plan for co-investments could be.

Board members Jason Perez and Theresa Taylor also asked CalPERS staff to address the alignment of interests between the co-investments and ESG strategies.

“I don’t want to see us be so aggressive that we’re getting ourselves involved in a situation that could end up like a Toys R Us situation or Sears situation, because it hurts our brand and that’s a risk to the fund,” Taylor said. “It also, you know, ends up being a loss for us.”

Toys R Us, which was acquired by KKR, Bain Capital and real estate investment firm Vornado in a $6.6 billion take-private in 2005, filed for chapter 11 bankruptcy in 2017. Sears, a publicly-listed company, filed for bankruptcy in October 2018.

“When we look [at] the ESG, we already have an example for ourselves where we lost money because of the S,” Taylor added. “And the G, actually, because we were invested in a fund where Toys R Us was one of the companies they were invested in. They bankrupted the company, the governance of the equity fund was questionable to me and we lost money on that. The reputational risk for that for us is bad because that hurts our reputation. And it hurt the reputation of the private equity fund.”