Potential Winners and Losers of CalPERS' PE Reallocation Plan
January 03, 2014
Numerous news sources have reported on CalPERS’ recently announced plans to reduce the number of its private equity manager relationships by about two-thirds, from its current 389 to about 120 in the future. A transition of this magnitude cannot happen overnight, of course, as CalPERS will undoubtedly use the secondary markets to cull some of its holdings while waiting for other funds to be fully liquidated and simply opting not to re-up with the manager. CalPERS is not alone in wanting to reduce the number of its PE relationships, as many investors have recently expressed a desire to make fewer, larger investments in the PE space in order to consolidate capital with the best performers and reduce back-office housekeeping. As CalPERS wrote in its annual review of its PE program last month, the “portfolio is over-diversified, creating challenges to generate returns above the median.”
Performance from PE investments does not seem to be too big of an issue for CalPERS at the moment, however.
For an analysis of CalPERS’ PE and VC portfolio performance, including a list of its best and worst investments, click here.