CalPERS sizes up emerging manager programme

The system has hired Cambridge Associates to conduct a review of its emerging manager programme.   

The California Public Employees’ Retirement System has set a timeline for a review of the emerging manager programme within its private equity portfolio.

The system recently hired Cambridge Associates to review 10 to 12 emerging managers from CalPERS’ private equity portfolio “in order to identify characteristics that contribute to an emerging manager’s success”, according to CalPERS documents. Cambridge’s findings will be reviewed by a panel selected by CalPERS’ investment office including senior staff, consultants and industry experts. The panel was scheduled to conduct its first review of Cambridge’s reports Tuesday and will deliver a report to CalPERS’ investment committee in March, the documents said.

CalPERS plans to include the findings of its review during its Emerging and Diverse Manager Spring Forum on 1 April, 2014.

Members of the panel from CalPERs include Theodore Eliopolous, senior investment officer for real assets; Réal Desrochers, senior investment officer of private equity; Laurie Weir, senior portfolio manager, and senior private equity staff members Christine Gogan, Sarah Corr and Scott Jacobsen. The panel also includes nine members from outside CalPERS, including Matt Barger, former general partner of Hellman & Friedman; Maria Conreras-Sweet, executive chairwoman of ProAmerica Bank; John McLaren, senior advisor of Monument Group; Paul Rice, senior advisor at Mesirow Financial and Ambassador Linda Tsao Yang of the Asian Development Bank.

CalPERS’ emerging manager programme has been at the centre of an ongoing row since 2012. The system has historically been a big supporter of emerging general partners, committing at least $10 billion to more than 300 of these smaller or minority-run firms over the last 23 years, but in recent years has slashed its allocation. CalPERS even attracted a lawsuit from Centinela Capital Partners, which used to run CalPERS’ emerging manager programme, for breach of contract and racial discrimination.

Recent commitments from CalPERS’ emerging manager programme include $100 million to Peak Rock Capital’s debut fund, which closed on its $700 million hard-cap in October. The Austin, Texas-based firm will make debt and equity investments in mid-market companies.

CalPERS has been looking to reduce its number of managers, write bigger cheques (in exchange for better economics) and open up more co-investment opportunities. Earlier this year, Desrochers told Private Equity International in an in-depth story that the firm wanted to move from 350 GP relationships to 80 or 100.

“It’s all about consistency of performance and good governance,” Desrochers said.“We want to try and build a core portfolio of managers that are institutional quality, and be a long-term investor with them.”