CalPERS Commits $1 Billion to Boost Diversity Among Alts Managers

The California Public Employees’ Retirement System is committing $1 billion to identify and support diverse and underrepresented private market investor entrepreneurs through asset managers TPG Inc. and GCM Grosvenor. [Source]

The $457 billion pension giant said it is investing $500 million in GCM Grosvenor’s Elevate strategy, which makes seed investments in small, emerging and diverse private equity firm founders, and $500 million in TPG’s Next fund, which aims to back younger, underrepresented alternative asset managers.

“We want to create and nurture an ecosystem that will serve as a catalyst to seed the next generation of diverse talent and foster different ways of seeing and solving problems,” CalPERS CIO Nicole Musicco said in a statement. “We welcome and encourage other global allocators to join us in this effort and re-imagine the traditional and structural dynamics in the markets.”

Grosvenor’s Elevate, which is being launched with CalPERS’ $500 million commitment, plans to raise incremental capital for the strategy, which it said will focus on lowering barriers to entry for investor entrepreneurs, as well as providing firm founders with non-investment infrastructure support resources.

“We hope to generate attractive returns and catalyze meaningful opportunities for the next generation of small, emerging and diverse firm founders in our industry,” Michael Sacks, chairman and CEO of GCM Grosvenor, said in a statement.

TPG’s Next fund, also recently launched, is anchored by CalPERS’ $500 million investment and is looking to increase the number of diverse-led firms in alternative assets and align the industry with broader demographic trends. TPG said the fund aims to “seed new managers, strengthen their access to capital, offer business building expertise and provide strategic advisory support to talent that is chronically underrepresented” in the alternative asset management industry. The target size of the fund was not disclosed.

“TPG NEXT seeks to address the talent gap through a suite of capital solutions and value-add support that is designed to address frequent pain points of new firms in a comprehensive way,” Pamela Pavkov, head of TPG NEXT, said in a statement. “Our aim is that this fund will not only advance diverse-led firms, but also the diverse communities that these managers are connected to.”

The CalPERS board recently increased its allocation to private investments to 13% from 8%, beginning with fiscal year 2022-23, to help boost its returns. The pension fund noted that private equity is the highest performing asset class in its portfolio.