CalPERS is pruning its private equity allocations again, according to a report in the Financial Times. The pension said it would be reexamining its relationships with managers, paring back to a core group and teaming up with other investors to drive down fees.
The move comes after the pension pulled out of hedge funds entirely citing similar reasons – complexity and fees. As PEI has reported, CalPERS cut back on private equity twice in 2014 as part of a broader effort to absorb cash from realizations and de-risk the portfolio during the prolonged public equities rally of 2014. In both of those cases, the pension said it was more or less just working to bring target allocations back in line.
The pension cut its target allocations from 14 percent to 10 percent as PEI reported in May. The pension is also considering a change to how it benchmarks overall private equity performance.
CalPERS has taken on a more conservative investment approach with the appointment of Ted Eliopoulos to CIO. He told the Financial Times that CalPERS would use “every possible lever” to drive down costs.
CalPERS currently maintains management relationships with almost 125 managers. Eliopoulos suggested that when all is said and done the final number of managers in its private equity portfolio could be less than 100.
Other pensions have recently moved to reduce non-core allocations. As our sister publication Secondaries Investor reported earlier this month, Ardian, Goldman Sachs Asset Management and Deutsche Bank all picked up stakes from a recent PSERS auction of non-core GP stakes.
CalPERS had $31.5 billion invested in private equity through June of 2014.