CalPERS’ PE boosted by separate accounts in FY2016

The customised accounts represented 8% of its overall PE portfolio, which now sits at $26bn.

The California Public Employees’ Retirement System’s (CalPERS) customised investment accounts produced the strongest performance of all the different private equity programmes the pension fund pursued for the 2016 fiscal year, which ended 30 June.

Sacramento-based CalPERS’ customised accounts returned 12.9 percent on invested capital for the just-ended fiscal year, according to the CalPERS Private Equity Program Semi-Annual Performance Report by Pension Consulting Alliance.

This marks a significant outperformance against other programmes, which include limited partnerships, which returned 1.4 percent; fund of funds, which returned 3 percent; co-investments and direct investments, which posted a 4.4 percent loss; and secondaries, which returned 5.6 percent.

The $26 billion net asset value for fiscal year 2016 is below last year’s figure of $28.9 billion, due to $6.6 billion in capital distributions from general partners that outpaced the $3.5 billion CalPERS contributed to fund managers.

The country’s largest public pension fund has focused on customised accounts in recent months to have more control on its private equity programme, as reported by Private Equity International.

As of 30 June, CalPERS’ customised investment accounts was valued at 8 percent, or $2.08 billion, of the $26 billion NAV of its private equity programme, up from 5 percent, or $1.5 billion, a year earlier.

However, its co-investment and direct investment programme produced the worst returns, after CalPERS stated last year it’s also focusing on co-investments for the same reason of obtaining a more active role with its own private equity investing. The co-investment and direct investment portion of CalPERS’ private equity NAV increased slightly, to 6 percent, or $1.56 billion, from 5 percent, or $1.5 billion, last year.

In terms of strategy, buyout continued to dominate CalPERS’ private equity portfolio, representing 57 percent, or $14.82 billion, of the $26 billion NAV. This was bolstered by CalPERS’ three largest buyout commitments, which include $1 billion to the $4.46 billion CVC Capital Partners Strategic Opportunities Compounding Capital and $500 million to Advent International Global Private Equity VIII, which closed in March on $13 billion. CalPERS also allocated $425 million to Ares Corporate Opportunities Fund V, which closed in April on $7.85 billion.

The report said buyout was the biggest contributor to CalPERS’ overall private equity performance, and returned 4.4 percent in the fiscal year ended 30 June.

CalPERS’ expansion capital strategy delivered a 0.2 percent loss in the same period, mainly due to the exposure to the energy sector that had a perilous year, and the underperformance of some large investments in financial services, the report said. 

Previous PEI coverage from November noted that CalPERS has been seeking to decrease its exposure to expansion capital and venture capital, which returned a 4.9 percent loss for this year.

CalPERS also has about $13 billion in dry powder, about half of which is commitments to funds in the 2013-2016 vintage years; $59.4 billion in active commitments; and $13.2 billion in active, authorised unfunded commitments, the report said.

Throughout the year, CalPERS authorised $3.9 billion in commitments to 18 opportunities with 12 different GPs.
The pension’s private equity portfolio represents 8.9 percent of its total portfolio, below the 10 percent interim target and 12 percent long-term target, the report said.