CalPERS Starts Fiscal Year with Burst of New PE Commitments

If CalPERS can keep pace, it could surpass the $5.3 billion in private equity commitments in the prior fiscal year

The California Public Employees’ Retirement System (CalPERS) has committed almost $2 billion to six new private equity funds in the first three months of the new fiscal year, pension fund data reports listing new investments activity shows.

The large commitments of the combined $1.925 billion allocated to new funds is $650 million to Hellman & Friedman Capital Partners IX. The $16 billion fund will specialize in buyout opportunities. The commitment was made in September.

The pension system also agreed to invest $400 million in Vista Equity Partners Fund VII-Z. The buyout fund will invest in software, data, and technology-enabled companies. The fund is managed by Vista Equity Partners Management. Another $400 million commitment in July was made to Welsh, Carter, Anderson & Stowe’s Fund XIII. The private equity firm specializes in funds investing in technology and healthcare companies.

Another $200 million commitment in August went to Tailwinds Capital Partners III, a private equity fund investing in middle-market businesses.  A second $200 million went to a fund sponsored by private equity firm TPG called TPG Golden Bear Partners.

The smallest commitment, $75 million, went to Palladium Equity Partners V. The buyout fund is managed by Palladium Capital Partners.

All of the CalPERS commitments were made by the system’s private equity staff using delegated authority. The commitments do not come before the pension system’s investment committee.

The six new commitments are the first to be announced in the private equity asset class for the new fiscal year that began July 1. If investment officials are able to keep up the pace, new commitments in the new fiscal year could reach almost $8 billion.

A review by the management of CalPERS $27.6 billion private equity program on November 13 detailed that CalPERS made $5.3 billion in private equity commitments in the 2017-2018 fiscal year, which ended June 30. Distributions, however, totaled more than $7 billion.

CalPERS has been unable to find enough private equity commitments to compensate for funds ending and making distributions, which has led to a shrinking of its private equity asset class. The private equity portfolio totals less than 8% of the $361.1 billion fund and has shrunk from 12% of the fund just a few years back.

A November report by CalPERS’s private equity consultant, The Meketa Investment Group, noted that “one of the key challenges faced by the program is to pace its investments in a steady manner and at scale in order to maintain the desired allocation to the private equity class.”

Meketa said CalPERS investment staff believes they would have to commit $10 billion a year to maintain an 8% allocation to private equity.





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