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CalPERS reveals $3.4bn in carry payments – update

After much anticipation, the California pension plan released data on carried interest, and vowed to cut relationships with managers unable to provide similar data moving forward.

A total of $3.4 billion dollars has been shared in profits with managers actively advising funds for the California Public Employees’ Retirement System (CalPERS), a number CalPERS reached after enduring heavy criticism for its ability to track fees.

The headline figure does not include accrued carried interest, which is calculated on a fair value basis by GPs and subject to frequent change, CalPERS chief investment officer Ted Eliopoulos said during a media call. That accrued amount, not yet distributed to GPs, is $1.7 billion, according to Eliopoulos.

The data further excludes non-active funds– which represent 20 percent of CalPERS’ private equity portfolio – because of the difficulty reaching former managers and obtaining data stretching too far into the past, Elipoulos said during the call.

Approximately 98 percent of active private equity managers in CalPERS’ portfolio complied with the pension’s data request. Going forward, the plan “will not do business with firms that refuse to provide this information to us,” warned Elipoulos.

In total, CalPERS has realised $24.2 billion in net gains from when the programme was established in 1990 to 30 June 2015. The earnings were based on $29.3 billion in original investments, with realised proceeds totalling $53.5 billion.

During fiscal year 2014-15, CalPERS realised $4.1 billion in private equity net gains while its external investment managers realised $700 million from profit sharing agreements, it said.

The asset class generates the highest net returns in its portfolio. Since inception the programme has returned 11.1 percent.

“The data released by CalPERS today shows the success of its private equity program, and is excellent news for California’s public employees, pensioners, and the state budget,” Private Equity Growth Capital Council spokesman James Maloney said. “It also highlights the strong partnership between private equity and pensions; a partnership based on an alignment of each party’s interest.”

The $295 billion pension system released its carried interest data after drawing public criticism for its ability to track fees. The pension system launched PEARS on 1 October as part of its effort to increase transparency and improve reporting on fees associated with its alternative asset investments.

As one of the largest pension funds in the US, CalPERS’ move is a significant step forward for those seeking greater transparency. It follows smaller funds such as the South Carolina Retirement System, which manages about $29 billion and has been releasing data on carried interest for two years, as reported by Private Equity International.

After launching its Fee Transparency Initiative, the Institutional Limited Partners Association (ILPA) released its first draft of the standardised reporting template in October. ILPA is still soliciting feedback on the template, which a group of 60 LPs, GPs, service providers and consultants drafted together, as reported by pfm.

In its recent Private Equity Annual Program Review report, the system stated it expects to spend $36.5 billion in private equity commitments through 30 June 2020, as reported by PEI.