Kaiser Permanente makes dramatic entrance to the GI 100

PEI’s LP of the year in North America also triumphs in the GI 100, suggesting this relative newcomer to the industry is here to stay.

Three institutions in this year’s ranking are based in Oakland, California, making this mid-sized American city a major centre for institutional private equity investing. In addition to University of California Retirement Plan and University of California Regents Endowment Fund, there is a new entrant: Kaiser Permanente.

Kaiser, a healthcare provider and non-profit health plan formed in 1945, had about $33 billion in private equity net asset value across its pension and foundation investments as of year-end 2021. This puts it at 15th in the ranking and makes it the fifth-biggest US-based LP, behind its Northern Californian counterparts CalPERS and CalSTRS, Washington State Investment Board and Teachers Retirement System of Texas.

This is especially striking as Kaiser only launched a formal PE investment programme in 2019. Since that year, its PE assets under management have gone from $6 billion to $33 billion, while its exposure has gone from 8 percent of its overall portfolio to 28 percent, giving it the 14th-highest percentage allocation on the ranking.

As of 31 December, Kaiser was below its policy target of 30 percent, according to documents prepared for Private Equity International’s annual awards, in which it won the award for best LP in North America.

Rapid transformation

Prior to 2009, 80 percent of Kaiser’s portfolio was comprised of large, global buyout funds. The arrival of Anton Orlich as head of alternatives in 2019 triggered a broadening of focus, PEI understands. Three-quarters of commitments that Kaiser Permanente made in the year to 31 October 2021 were in the mid-market, while it also diversified away from buyouts, with 35 percent of new commitments going to growth, 15 percent to venture capital and 10 percent to private credit.

Since 2019, Kaiser has looked to invest in first-time funds, opting to be a significant investor for younger GPs over being a less important one for mature managers. It has also targeted a diverse group of relationships, with more than 50 percent of its new relationships since 2019 being women-owned businesses and 25 percent being minority-­owned.

“Anton is a very decisive person,” a GP who has worked alongside Kaiser tells PEI. “If he believes in something, he does it… And the team is brilliant.”

Kaiser has managed to quickly build a venture capital franchise, committing $1.5 billion in the 12 months to 31 October. It has also put several billions to work in PE co-investments, PEI understands.

Details on Kaiser’s GP relationships are difficult to come by, and Orlich did not respond to requests to participate in this article. Affiliate title Buyouts notes that funds managed by KKR, Warburg Pincus, TPG, Mount Kellet and Equistone Partners were part of a $1.5 billion portfolio that Kaiser shopped on the secondaries market in March. PEI understands that a deal got done, though it was scaled down due to the reduced risk appetite of buyers in a more volatile market environment.

Growing a private equity portfolio at speed is full of challenges. The desire to put money to work quickly requires an LP to generate a consistent stream of high-quality investment opportunities and to diligence them without cutting corners. Time will tell how well Kaiser’s portfolio performs, though its ambition and creativity is to be applauded.