The California Public Employees’ Retirement System (CalPERS) paid $414.1 million in fees and costs to private equity funds in 2014, according to CalPERS annual investment report released on 7 January.
This is down 6 percent from $439.7 million it paid the previous year.
CalPERS spokesman Joe DeAnda told Private Equity International that the fees include “everything besides carried interest” and consist of “mostly management fees.” The fees and costs were paid in relation to CalPERS’s Public Employees’ Retirement Fund (PERF).
In November CalPERS released carried interest data for the first time, showing a total $3.4 billion shared in profits with managers advising funds for the pension system, as PEI reported.
Apollo Special Opportunities Managed Account received the largest amount of fees and costs in 2014 at $16.2 million, according to the report. In total, Apollo received more than $30 million through the different funds CalPERS is committed to.
CalPERS also spent nearly $15 million in fees and costs associated with Health Evolution Partners (HEP) in 2014. This amount accounts for 3.6 percent of the $414.1 million total paid to the funds.
CalPERS initially committed a total $700 million in HEP Spectrum Fund and HEP Growth Fund in 2007 and 2008, respectively, according to PEI’s Research & Analytics division. HEP accounted for 1.5 percent of CalPERS’ total private equity investments in 2013, making it the 18th largest general partner to which CalPERS had exposure. CalPERS was the only LP in the HEP funds.
CalPERS’ performance report for 2013 showed that its investment in HEP generated a negative net internal rate of return of 5.2 percent for the 1-year period, a gain of 6.8 percent for three years, and a negative net IRR 3.8 percent for five years. There were other GPs in the period that generated losses for CalPERS, but most of the CalPERS stake in their funds were below $30 million; its stake in HEP was $496 million.
PEI’s sister publication Secondaries Investor reported in April that fund of funds manager HarbourVest Partners acquired CalPERS’ $500 million stake in HEP’s growth fund, after CalPERS had been HEP’s only limited partner. AAD LINK TO STORY
Secondaries Investor said CalPERS began searching for a buyer for its stake in the HEP growth fund around mid-2014 and Landmark Partners had also placed a bid. HEP was not available to comment at press time.
Other funds that received some of the largest amounts in fees and costs include Blackstone Tactical Opportunities Fund, a separate $500 million account for CalPERS from 2012. It cost the pension fund $11.1 million in 2014. In total, Blackstone received more than $15 million through the different funds CalPERS is committed to.
The fourth largest amount went to Permira V, a €5.3 billion ($7.2 billion) vehicle, which cost $10.1 million in 2014.
In the same report, CalPERS indicated that PERF’s private equity portfolio returned 8.9 percent, 14.1 percent, 14.4 percent and 11.9 percent for one-, three-, five- and 10-year periods. It outperformed the public equity portfolio for all periods except three-year timeframe, in which the public portfolio generated slightly more, at 14.5 percent.