CalPERS hires former CalSTRS private equity head

Réal Désrochers has left a CIO post for a Saudi-backed investment arm to head CalPERS' private equity programme, which has recently been the subject of state ethics probes.

The California Public Employees’ Retirement System has hired private equity investment veteran Réal Désrochers to lead its $33 billion “Alternative Investment Management” private equity programme, which has been bogged down with accusations of ethical lapses on the part of some investment professionals.

Désrochers previously led the private equity programme at fellow public pension the California State Teachers’ Retirement System, a position he took in 1998 and from which he retired in 2009. Since then, he has worked as the chief investment officer of the Saudi Arabian Investment Company. Prior to CalSTRS, Désrochers spent 11 years running the international private equity programme for the Canadian pension La Caisse de dépôt et placement du Québec.

Désrochers does not yet have a start date, a CalPERS spokesperson said. He will oversee CalPERS’ private equity investment team and external advisors “to ensure that the pension fund’s investment strategies, policies and new initiatives are executed efficiently”, the pension said in a statement.

Réal
Désrochers

“[Désrochers] did a fine job overseeing the private equity programme of our sister fund, [CalSTRS], generating annual returns of more than 17 percent in the decade that he was there,” Joe Dear, CalPERS CIO, said in a statement. Our AIM programme is in good hands and will suffer no interruption in its investment plan or board policy.”

Désrochers was not available for comment.

He replaces Leon Shahinian, who stepped down last year after he admitted to taking a lavish, all-expenses-paid trip funded by placement agent Alfred Villalobos, who has been under investigation by California’s Attorney General Jerry Brown for alleged pay-to-play activities.

Investigation eventually revealed firms willing to pay Villalobos, a former CalPERS board member, in exchange for commitments from the pension, even firms like Apollo Global Management, a firm in which the pension owned a stake, which would seem to preclude the need for a fundraising intermediary.

The pension this year also lost Joncarlo Mark, senior portfolio manager in the alternatives programme, who resigned. Mark was never accused of wrongdoing but admitted to accepting gifts from firms and going on trips on private jets.

CalPERS completely restructured the way it manages private equity relationships, adding layers of transparency to the process of committing to funds and working to eradicate the need for managers to work through placement agents to get noticed. The pension also reached deals with some managers to cut fees, including Apollo.

In May, California’s Fair Political Practices Commission revealed it was investigating about 50 CalPERS’ employees for failing to properly report gifts as required by state law. Dear, the pension board’s president Rob Feckner and former CalPERS’ chief executive officer Fred Buenrostro were among those under investigation, according to media reports.

Subscribers to Private Equity International can read our in-depth article from 2009 about Désrochers' retirement here.