In private equity’s emerging manager community, there is no bigger event than the Robert Toigo Foundation’s annual gala.
For more than 20 years, CalPERS has been a national leader in advancing Toigo's mission — creating opportunities in finance for minorities and women.
One of the key factors in an emerging manager programme is that the best performers “graduate” into direct commitments from the system. However, CalPERS has not re-upped with any manager in the private equity emerging manager portfolio for 18 months, sources say.
This is where the distress comes in … [CalPERS] is saying they're supporting emerging managers, yet the ones they have supported and who have returned quite well are not being funded.
The suspicion that CalPERS is less committed to its emerging manager programme has been fostered by the gradual breakdown of its relationship with Centinela.
In the current market environment, we have had to make some tough decisions about our partners to improve the long-term performance of our fund.
Meanwhile, tensions have been escalating between CalPERS and its existing private equity emerging managers. Many of the latter have grown frustrated with what they see as CalPERS ignoring them, i.e. not even returning phone calls or emails, according to sources.
Joe Dear in an interview earlier this year
We're in the state of California — the nation's largest state, the nation's most diverse state, ethnically and culturally … It is in our economic interest to have as wide a pool of talent as possible available to us so we can achieve our investment target.
On the other hand, although there’s an argument that CalPERS’ bench of investment managers ought to be reflective of its home state, the pension system would say that its primary responsibility must always be to its pensioners – which means that issues around performance and fees may always need to take precedence over any social goals. CalPERS now needs to play quite a balancing act.
Subscribers to Private Equity International magazine can also read this article in our October issue.