The California Public Employees’ Retirement System (CalPERS) intends to continue to take advantage of the secondaries market to reduce the number of its external private equity and real estate managers.
This is part of the next step in its multi-year restructuring plan to reduce risk, cost and complexity in its portfolio of external managers.
“Secondaries sales [are] a tool in our toolkit we’ve used in the past five years in private equity,” Ted Eliopoulos, chief investment officer of CalPERS, said in a press conference call. “We’ll continue to look at secondaries to optimise our performance.”
Eliopoulos added that the $300 billion pension fund also plans to use the secondaries market to reduce relationships on the real estate side.
But some of the reduction could take a long time. “We see no hurry to make cuts,” Eliopoulos said. “That would not be in our best interest.”
The plan will be presented to CalPERS’ investment board on 15 June.
On the private equity side, CalPERS currently has direct relationships with 100 firms, representing 350 funds. It wants to reduce the number of direct relationships to 30.
Over the past five years, the pension fund has been able to save more than $293 million through a combination of reduced fees obtained thanks to negotiations as well as the elimination of programs, especially on the hedge fund side, Eliopoulos said.
Eliopoulos declined to comment on whether it is currently working with a secondaries advisor. In April, Secondaries Investor reported that UBS was advising CalPERS on the sale of $1 billion-worth of private equity fund stakes in about 20 separate funds.
In late 2007 the bank reportedly led the sale of $2 billion-worth of private equity fund interests, followed by another $800 million-worth of stakes in 2011.
UBS declined to comment for this story.