CalPERS Moves Closer to Expanding Private Equity Investments
An article by Ed Mendel, who is a frequent critic of public pensions, in Calpensions reports that CalPERS appears to be moving towards the establishment of two captive private equity investment funds. One fund would focus on "innovative" investment strategies, while the other would focus on "long-term" strategies. Both funds would be run by outside experts who would not be under state salary caps. The article did not state if these funds would be subject to the transparency rules that govern CalPERS.
According to the article, '[n]ew CalPERS chief investment officer, Ben Meng, who began work in January, told the board last month he was glad to hear the staff had adopted a “trial and error” approach to the plan developed during the last two years after extensive research.
“It may or may not work and may or may not work now,” he said. “However, given our current underfunded status and our outlook for the economy, doing nothing is not an option.”
Replying to critics who want an “in-house” staff that could buy companies on their own, like some Canadian public pension funds, Meng said CalPERS lacks the expertise and is not located in a financial center usually desired by top talent as they look for deals.'
The article goes on to state that "during a public period at the board meeting last month, the CalPERS staff’s four-part private equity plan, including the two new companies, got support from most of the major local government groups and public employee unions."
For details on how these private equity funds work, see the extensive article by Tom Donahue (SDSU, Chair, Pre- and Post-Retirement Concerns Committee) in the November 2018 issue of the CSU-ERFSA Reporter.