CalPERS hires Credit Suisse for emerging managers

The $226bn retirement system has awarded a $100m commitment to Credit Suisse to build exposure to domestic emerging managers. Credit Suisse beat out Centinela Capital for the mandate.

The California Public Employees’ Retirement System’s long struggle with the firm running a domestic emerging manager mandate, Centinela Capital Partners, may be coming to an end.

Credit Suisse won a $100 million mandate from CalPERS to run a domestic emerging managers private equity programme, beating out the former manager Centinela in a competitive bidding process. Credit Suisse will target funds less than $1 billion for buyout strategies and special situations, and less than $500 million for growth and venture capital.

That $100 million commitment has a complicated history. The pledge was originally intended for Centinela, which has managed a domestic emerging manager programme for CalPERS since 2006. CalPERS has committed about $1 billion to Centinela through two vehicles called the Capital Link funds – worth a total of $1 billion. Those funds have committed to managers like Vista Equity Partners and Clearlake Capital Partners.

While most of our investments are with a half-dozen or so major global partners, we want to ensure that we don't overlook emerging managers and their prospects for high rates of growth and performance.

CalPERS spokesperson

CalPERS officials were last year contemplating a $100 million re-up with Centinela into a third Capital Link fund, but the system reversed course after its head of alternatives Réal Desrochers decided “it would not be in keeping with CalPERS’ fiduciary duty to award Centinela Capital Link III as previously contemplated”, according to CalPERS’ documents obtained by Private Equity International through a public records request last year.

The system had apparently lost confidence in the head of Centinela, Cesar Baez, and persuaded the firm to push him out. Centinela complied and Robert Taylor and Fidel Vargas took over the leadership of the firm. The documents don’t make clear why CalPERS lost confidence in Baez.

Despite working “closely with CalPERS staff to meet all of the objectives of the emerging manager mandate including performance … identifying GP candidates for core relationships, and sensitivity to diversity”, the system decided to launch a request for proposals process to find a manager to run the programme. Centinela took part in the bidding but lost out to Credit Suisse.

However, Centinela will continue to manage the existing Capital Link funds, a CalPERS spokesperson confirmed. It’s unclear if Centinela has signed on with CalPERS for any specific timeframe, or will work to manage out the two funds.

CalPERS is a supporter in emerging private equity managers, even as it has been restructuring its Alternative Investment Management programme to cut down the number of relationships.

Emerging managers are a way to “maximise CalPERS’ prospects for attaining high returns from top quartile funds”, a spokesperson told Private Equity International in a prior interview.

“While most of our investments are with a half-dozen or so major global partners, we want to ensure that we don’t overlook emerging managers and their prospects for high rates of growth and performance,” the spokesperson said.