The California Public Employees’ Retirement System has extended an olive branch to emerging managers in an effort to improve its strained relationship with that community.
CalPERS will host the first in a series of workshops for emerging managers seeking to partner with the retirement systems, according to an announcement released Friday.
“We have heard loud and clear from the emerging manager community that we can do a better job with our external outreach,” said CalPERS chief investment officer Joe Dear in a statement. “As we’ve detailed in our Emerging Manager Five-Year Plan, we will increase our communication, marketing and networking with the emerging manager industry and this workshop is a continuation of our work to that end.”
The workshop will include an overview of CalPERS’ emerging manager programme, as well as provide insight into how the retirement systems assess emerging managers and their investment proposals.
CalPERS could not be reached for comment at press time.
CalPERS has run afoul of the emerging manager community recently. Several sources have indicated to Private Equity International that the $240 billion retirement system has drifted away from that component of its investment strategy, opting instead to invest in a handful of larger fund managers.
Although CalPERS awarded a $100 million mandate to Credit Suisse for private equity emerging managers last year, that total pales in comparison to the $1 billion it had invested through its partnership with Centinela Capital Partners since 2006.
Centinela managed Capital Link Funds I and II, which have delivered mixed results since their inception, according to the five year emerging manager plan released in August. The $500 million Capital Link Fund I was generating a 7.2 percent internal rate of return and a 1.2x multiple as of 31 December, according to CalPERS’ website. Fund II, also a $500 million vehicle, was producing a .6 percent IRR and a 1x multiple as of the same date. More updated numbers were not available as of press time.
CalPERS recently severed its ties with Centinela after the firm brought claims of racial discrimination and breach of contract against the retirement system. Centinela claims that CalPERS had promised the firm a third mandate, totaling $100 million, if founding partner Cesar Baez were removed. CalPERS allegedly had become concerned about some of Baez's relationships with “Latino” placement agents accused of wrongdoing involving CalPERS, even though neither Baez nor Centinela was ever accused of wrongdoing.
That mandate was eventually awarded to Credit Suisse, which will also take the reins on the Capital Link funds from Centinela.
Later on that month, while attending a hearing hosted by two state senators, Dear addressed concerns that CalPERS was moving away from emerging managers by saying: “It’s not my job to make managers happy … I recognize our restructuring work and our focus on performance have caused some concern among the emerging manager community”.
Even though the retirement system remains dedicated to the strategy, it has made an effort to cut back on its number of relationships, he said.
“We’re going through each strategy and asking if managers are helping us achieve our target or not, and making very tough decisions not to invest in new programmes from those managers, or in taking our money back and redeploying it elsewhere in the portfolio,” Dear said.
CalPERS has approximately $9.7 billion invested in 300 emerging managers across asset classes, according to a release. The emerging managers programme represents more than 11 percent of its total portfolio.
CalPERS' original announcement indicated that the California State Teachers' Retirement System would also be participating in the workshops, which is not the case. CalPERS spokesman Brad Pacheco attributed CalSTRS' inclusion in the original release to a communication breakdown between the two retirement systems.