The Institutional Limited Partners Association, the industry association for plan sponsors that invest in private equity, has moved to the next level, said Rick Hayes, the newly elected chairman of the organization.
Mr. Hayes, who oversees the $20 billion alternatives investment program at the $151 billion California Public Employees' Retirement System, Sacramento, said the organization recently reached several milestones. It held its first elections in October; and in September, members ratified proposals for the organization's structure, mission statement and ability to collect dues.
The group began informally in 1993, when only a few institutional investors representing an estimated $12 billion in private equity investment met once a year. But by last year, that figure had swelled to more than 100 institutions representing $150 billion invested in private equity in 2000 alone. "The number of people investing in the asset class evolved, so more sponsors joined," Mr. Hayes explained, adding the organization probably represents 80% of the $2.5 trillion in total global private equity capital. Many sponsors such as CalPERS have several members, but each sponsor gets only one vote. There are 300 members in the ILPA database.
ILPA was created to provide plan sponsors with a forum where they can discuss important industry issues and "where we won't be marketed to," as Mr. Hayes phrased it. The association is a cross-section of U.S. and international corporate and public pension funds, endowments and foundations.
In addition to Mr. Hayes, the other private equity officials elected to the board are: vice chair, Frank Fernandez, $95 billion State Board of Administration of Florida, Tallahassee; secretary, Jeff Sharpe, $38 billion Lockheed Martin Corp. pension fund, Bethesda, Md.; treasurer, Mark Barnard, $12 billion Howard Hughes Medical Institute endowment, Chevy Chase, Md.; membership director, Pamela Harris-Jenkins, $29 billion Bell South Corp. pension fund, Atlanta; and program director, Kevin Kester, $30 billion Public Employees' Retirement Association of Colorado, Denver.
The next general meeting is scheduled for March in Miami. It will be sponsored by the Florida pension system and the $1.2 billion John and James Knight Foundation, Miami.
One of the board's first tasks will be deciding how to deal with potential new members that aren't plan sponsors, Mr. Hayes said. It is trying to figure out the best way to classify funds of funds. "There are about 50 funds of funds now, and we're considering whether to create a separate class of membership for them. Some have asked to join, because they, too, are investing in private equity, and many of them have more capital to invest than small state pension funds do."
In the last year, several members worked on developing the group's mission statement, Mr. Hayes said. "It's very important because it will be our road map for the next 10 years."
From an investor standpoint, there are a lot of issues that need to be resolved. CalPERS, for example, is an investor in 300 different partnerships. Every quarter it receives 300 statements in 300 different formats, Mr. Hayes observed. "Different general partners calculate their IRRs (internal rates of return) differently. It leads to questions about how they measure, how they benchmark. Maybe there is too much focus on IRRs. Instead, they could put more emphasis on how much cash went in vs. how much went out. That's what the investors really care about."
An important goal of the organization is to figure out a way of getting the limited partners and general partners to agree on a consistent way of reporting valuations. Right now there is no good method for sharing information, and members hope to find one and to achieve greater transparency.
For now, the focus will be on issues involving communication, transparency and setting standards, rather than reducing fees.
An important aspect of the ILPA is the opportunities it offers for networking with colleagues, said Kevin Kester, director of alternative investments at Colorado PERA. "If we're looking at an opportunity in Europe, for example, it's helpful if I can contact an investor who's been there to ask what he thinks about such things as Munich biotech or German venture cap."