Former CalPERS PE advisor sued by fund manager

A former fund of funds manager has claimed over $30m in damages due to PCA’s allegedly wrongful recommendations made to CalPERS about the firm.

The former private equity portfolio consultant to the California Public Employees’ Retirement System is being sued by a third-party fund manager for alleged reputational damage and monetary losses.

Portland-based Pension Consulting Alliance, which served CalPERS’s private equity advisor between July 2015 and March 2017, and one of its managing directors Michael Moy, are defendants in a lawsuit brought by Caesar Baez, a former managing partner of Centinela Capital Partners.

In the complaint filed March 2 in the US District Court in the Central District of California’s Western Division, Baez sued for the alleged “destruction” of his career in investment management and Centinela, a fund of funds he co-founded with two other partners in 2006.

CalPERS had sought to invest up to $500 million in a fund of funds focused on emerging and minority managers, committing to Centinela’s Capital Link Fund I in 2007 and to its Capital Link Fund II in 2008. By 2008, Centinela was managing about $1 billion of CalPERS’ money, according to the lawsuit.

Baez, who at the time allegedly held a 36.5 percent interest in Centinela, claimed the firm and CalPERS were in discussion, beginning 2009, about a third investment contract to be called Capital Link Fund III. However, PCA, as CalPERS’ investment advisor, performed due diligence and determined that the Sacramento-based pension shouldn’t invest in a third Centinela fund unless Baez’s employment with the fund was terminated, according to the lawsuit.

Although Baez’s employment was terminated following PCA’s analysis, CalPERS removed Centinela from the competition pool for a fund of funds mandate, and terminated the existing contracts for Capital Link Funds I and II, the lawsuit said.

As a result, Baez incurred damages of over $30 million including loss of salary and distributions, and loss of value and reputation for both Centinela and Baez, according to the complaint.

A summons was issued March 13 to the defendants, PCA and Moy, who have until April 3 to issue a response to the complaint.

PCA notified CalPERS of its resignation as private equity advisor, effective March 16, as reported by sister title Private Equity International. Moy subsequently resigned, effective April 28.

This is the second lawsuit Baez has brought against CalPERS; he was involved in a separate lawsuit from 2012. Although it was recently dismissed on summary judgement, Baez filed a notice of appeal to reinstate it according to the most recent complaint.