CalPERS pension fund to review private equity investments

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UPDATE 1-CalPERS pension fund to review private equity investments

(Adds information from CalPERS meeting, its private equity
    By Robin RespautJune 19 (Reuters) - The California Public Employees'
Retirement System, or CalPERS, plans to scrutinize its private
equity investments at next month's board meeting with an eye
toward reviewing the governance and transparency of the asset
    Chief Investment Officer Ted Eliopoulos told the investment
board on Monday that despite the high returns of its private
equity investments, the negative public scrutiny of the asset
class had made "it increasingly difficult for CalPERS to compete
successfully in the private equity marketplace."
    The "fish bowl of CalPERS may have reached a tipping point
for us in private equity," said Eliopoulos. "Over the course of
the past two years and frequently in these monthly investment
committee meetings, CalPERS staff is attacked and denigrated for
our decision to invest in these funds."
    In July, the pension fund plans to review "the private
equity business models available to us," Eliopoulos told the
board, in order to find an "effective governance system to
oversee private equity investing." He warned that if CalPERS
cannot find a solution, the board may need to "weigh a much
reduced allocation to private equity."
    As the country's largest public pension fund, CalPERS has
come under increasing public pressure to calculate and disclose
the fees it pays for its private equity investments.
    The fund announced last November that it had shared about 14
percent of its private equity profits over the past year with
firms managing the money. The announcement marked a major
milestone toward greater fee disclosures within the asset class.
    In December, CalPERS announced that it would reduce its
private equity asset class from 10 percent to 8 percent of the
total portfolio in order to reduce some of the risks in the
    Roughly $25.9 billion of CalPERS' $318.9 billion fund was
invested in private equity as of April 30.
    Private equity is now the only asset class in CalPERS'
portfolio with a return forecast above 7 percent over the next
decade, making the asset class a vital component to maintaining
the fund's assumed return rate of 7 percent by 2020.
    CalPERS, along with most public pension funds across the
country, has struggled to achieve its investment goals in recent
years. CalPERS returned 0.61 percent last year, compared to its
assumed rate of return at the time of 7.5 percent.

 (Reporting by Robin Respaut; editing by Daniel Bases, G Crosse)
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This article appears in: World Markets , Stocks , 401k , Insurance , Technology , Retirement

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