CalPERS passes $5bn profit milestone

The California pension giant will inform its board that the alternative investment group has received its five billionth dollar in cash profits. ‘Look out $10 billion, here we come. . .’

Staff of the alternative investment management programme at the California Public Employees’ Retirement System (CalPERS) will tomorrow inform its investment committee that the pension has received more than $5 billion (€3.9 billion) in cash profits from private equity investments, a programme CalPERS initiated in 1990.


In an agenda item prepared for tomorrow’s meeting, senior investment officer Rick Hayes wrote that in December, “The AIM portfolio successfully surpassed the [$5 billion] profit mark.”


Hayes added: “Now that this milestone has been achieved, the AIM team has a new motto: ‘Look out $10 billion, here we come. . . ‘”


Sacramento, California-based CalPERS, one of the largest backers of private equity in the world, has commitments to 357 funds, with a total value of roughly $19.8 billlion, as of September 30, 2003.


Since the programme’s inception in 1990, CalPERS has contributed $13.2 billion to private equity deals and received back $8.5 billion in distributions. The AIM staff now counts $5 billion as profits. In a quarterly review prepared by State Street for the pension, CalPERS’ alternatives  portfolio is described as having a “young relative age.” The review notes: “As the portfolio matures and distributions grow, the [p]rogram is becoming self-sustaining.”


The review notes that the AIM programme’s net IRR since inception has been 9.1 percent. For the initial three vintage years of CalPERS’ commitment to private equity, the pension has generated an investment multiple of 2.4, 2.8 and 2.1, respectively.


The pension’s biggest year in terms of commitments was 2001, during which CalPERS committed $5.1 billion to private equity funds. In 2003 it committed only $954 million.