CalPERS staff plans to make a recommendation by year-end on whether the system can boost its allocation to Arrowstreet Capital, the poster child for its 2-year-old manager development program. For the 25 months that Arrowstreet has been in the program, the international equity manager has beaten its benchmark by 5.73 percentage points annually, while its assets under management have multiplied 11 times during that period, to $2.5 billion.
In June 2000, the $140 billion California Public Employees Retirement System, Sacramento, allocated $100 million to Arrowstreet under the pension funds incubator MDP program. CalPERS acquired a 15% stake in the firm for nearly $3 million and holds a $1.5 million 12% subordinated note with warrants worth another 5%. The staff, with its MDP partners and its legal office, is examining whether the fund can make a side-by-side allocation to managers in its incubator program.