CalPERS releases long-awaited carry data

A total of $3.4 billion dollars has been shared in profits with managers actively advising funds for the California Public Employees’ Retirement System (CalPERS), a number CalPERS reached after enduring heavy criticism for its ability to track fees.

A CalPERS spokesperson said that the $3.4 billion figure was arrived at by asking managers to report the aggregate amount of carry “attributed” to CalPERS only, implying that managers reported carry based on CalPERS’ commitment size per fund. Only carry distributed, not earned or accrued, was included in the figure.

CalPERS “will not do business” with GPs that fail to provide similar carry information in the future, CalPERS chief investment officer Ted Eliopoulos said in a media call.

In total, active private equity funds in CalPERS’ portfolio have achieved $24.2 billion in realised net gains for the pension from 1990 to 30 June, 2015, according to data from its newly operational Private Equity Accounting and Reporting Solution (PEARS). The earnings were based on $29.3 billion in original investments, with realised proceeds totaling $53.5 billion.

During CalPERS’ last fiscal year alone, the plan realised $4.1 billion in private equity net gains while its private equity managers realised $700 million in carry from funds CalPERS was invested in.

Prior to the release of the data, concerns had arisen over how the data would be portrayed in the media, with industry practitioners fearing the headline figures would be used to paint private equity as an expensive asset class.

In October, Bloomberg cited sources stating that CalPERS’ carried interest data may hold “shock value” for the public. On Tuesday, The Sacramento Bee ran a headline entitled “CalPERS discloses private equity investment fees: $1 billion”, presumably referring to the $700 million fiscal year figure cited earlier.

In response to the data release, a spokesperson for the Private Equity Growth Capital Council said that the numbers demonstrate the “success of [CalPERS’] private equity program, and is excellent news for California’s public employees, pensioners, and the state budget.”

Private equity is CalPERS’ best performing asset class, according to pension figures. Since inception, CalPERS’ private equity investments have generated an average 11.1 percent return.

This article first appeared in Private Funds Management.