CalPERS plans to trim PE portfolio

CalPERS is cutting its relationships with managers and paring back private equity, but it's unclear if it will use the secondaries market to do so.

CalPERS is pruning its private equity allocations again, according to a report from the Financial Times. The pension said it would be re-examining its relationships with managers, paring back to a core group and teaming up with other investors to drive down fees.

CalPERS currently maintains management relationships with nearly 125 managers. Chief investment officer Ted Eliopoulos suggested that the final number of managers in its private equity portfolio could be fewer than 100.

It’s unclear if CalPERS plans to use the secondaries market to reposition its portfolio and a spokesperson told Secondaries Investor that it’s exploring a number of options.

“We’ll use all the tools available to us and do it in a manner that is most beneficial to the fund. There isn’t a set plan or timeline,” he said.

CalPERS cut back on private equity twice last year as part of a broader effort to absorb cash from realisations and de-risk the portfolio during the prolonged public equities rally of 2014. In both of those cases, the pension said it was more or less just working to bring target allocations back in line.

It reduced target allocations from 14 percent to 10 percent in May and is also considering a change to how it benchmarks overall private equity performance. The move comes after the pension pulled out of hedge funds entirely for similar reasons – complexity and fees.

CalPERS has taken on a more conservative investment approach with the appointment of Eliopoulos to CIO. He told the Financial Times that CalPERS would use “every possible lever” to drive down costs.

Earlier this week Secondaries Investor reported the San Diego County Employees’ Retirement System (SDCERA) planned to reduce the number of private equity GPs in its portfolio from about 31 to between 16 and 18. SDCERA said it planned to cut back through attrition and not via the secondaries market.