Calpers Investment Chief Renews Pitch for Private-Equity Revamp
Staff of the nation’s largest pension is trying to sell a new investment model to its sometimes skeptical board
By Chris Cumming
The board of the nation’s largest pension still has plenty of
questions about a proposed shake-up in its private-equity strategy,
roughly two years after the pension’s staff began developing the plan.
Ben
Meng, chief investment officer of the California Public Employees’
Retirement System, on Tuesday detailed the proposed new strategy for
private-equity investing, arguing that without it the underfunded
pension system could have trouble hitting return targets and making its
required payouts to retirees.
Mr.
Meng, who joined the $337 billion fund last month, argued that the new
strategy was necessary to get more exposure to the best-performing
private-equity managers.
“We need private equity, we need more of it, and we need it now,” he said.
Calpers’ private-equity reform has attracted some controversy since it was unveiled last May, after more than a year of discussion behind-the-scenes.
The plan would hire general partners to manage two new companies initially funded entirely by Calpers but not part of the pension system. One company would make late-stage venture-capital investments and one would seek investments with longer hold times than the five years typical for private equity.
On Tuesday, several members of Calpers 13-person board expressed skepticism about the proposal, citing concerns about transparency and oversight. Others, however, appeared to support the plan. There is no timeline for a board vote on the proposal, a Calpers spokeswoman wrote in an email.
The governance structure “gives me pause,” said California State Controller Betty Yee, who said she was concerned that the board would be giving up its oversight responsibilities to the outside managers.
California State Treasurer Fiona Ma also said she had doubts.
“Setting up a whole new division with more people, and trying to attract the top talent, is going to be difficult, and I’m not leaning in that direction,” she said.
The fund’s meeting on Tuesday continued with discussions between the board and the staff that were closed to the public.
Calpers’ private-equity plans have come into focus slowly, as the pension has fielded tough questions about the approach amid significant staff turnover. The plan was developed under former CIO Ted Eliopoulos, whose departure was announced three days before the new model was rolled out. Former chief operating officer Elisabeth Bourqui resigned last month after about six months on the job.
The fund is also without a permanent head of private equity. Sarah Corr is serving as interim head for the asset class and Calpers is currently interviewing candidates for the permanent role, a spokeswoman for the pension wrote in an email.
Mr. Meng on Tuesday advocated for a sharp increase in private-equity commitments. Private-equity was Calpers’ best-performing asset class last year, with a 6.3% net return, though it underperformed its policy benchmark.
https://www.penews.com/articles/calpers-investment-chief-renews-pitch-for-private-equity-revamp-20190221
Calpers’ private-equity reform has attracted some controversy since it was unveiled last May, after more than a year of discussion behind-the-scenes.
The plan would hire general partners to manage two new companies initially funded entirely by Calpers but not part of the pension system. One company would make late-stage venture-capital investments and one would seek investments with longer hold times than the five years typical for private equity.
On Tuesday, several members of Calpers 13-person board expressed skepticism about the proposal, citing concerns about transparency and oversight. Others, however, appeared to support the plan. There is no timeline for a board vote on the proposal, a Calpers spokeswoman wrote in an email.
The governance structure “gives me pause,” said California State Controller Betty Yee, who said she was concerned that the board would be giving up its oversight responsibilities to the outside managers.
California State Treasurer Fiona Ma also said she had doubts.
“Setting up a whole new division with more people, and trying to attract the top talent, is going to be difficult, and I’m not leaning in that direction,” she said.
The fund’s meeting on Tuesday continued with discussions between the board and the staff that were closed to the public.
Calpers’ private-equity plans have come into focus slowly, as the pension has fielded tough questions about the approach amid significant staff turnover. The plan was developed under former CIO Ted Eliopoulos, whose departure was announced three days before the new model was rolled out. Former chief operating officer Elisabeth Bourqui resigned last month after about six months on the job.
The fund is also without a permanent head of private equity. Sarah Corr is serving as interim head for the asset class and Calpers is currently interviewing candidates for the permanent role, a spokeswoman for the pension wrote in an email.
Mr. Meng on Tuesday advocated for a sharp increase in private-equity commitments. Private-equity was Calpers’ best-performing asset class last year, with a 6.3% net return, though it underperformed its policy benchmark.
https://www.penews.com/articles/calpers-investment-chief-renews-pitch-for-private-equity-revamp-20190221
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