CalPERS staff categorized the $200.2 billion fund's 135 private equity relationships in preparation for overhauling the $25.5 billion program, as recommended by Pension Consulting Alliance. Staff divided the investments into three categories: a core portfolio of 20 to 30 firms; a prospective core portfolio of 30 to 40 firms that have the potential to move to the core portfolio; and a legacy portfolio that includes non-core and underperforming funds that will eventually be sold off. Subject to board approval on Dec. 12, the overhaul will be performed over the next year, but the legacy portfolio sales will take three years.
In addition, CalPERS is creating a new category that will include funds of funds, smaller investments and co-investments as part of the reorganization. CalPERS plans to select managers for the new categories and negotiate contracts in the second and third quarters.
Staff also plans to select a firm to monitor the legacy investments in the first quarter of 2006 and transfer those relationships during the second quarter.
CalPERS also plans to hire a consultant to help review co-investment strategies in the second quarter. The fund also hired Russell Investment Group to evaluate the program's benchmarks.
Separately, CalPERS staff recommended renewing the annual contracts of its two currency overlay managers, Pareto Partners and State Street Global Advisors. As of Sept. 30, Pareto and SSgA ran overlays on $5.8 billion and $2.5 billion, respectively, of CalPERS' passively managed international equity portfolios. Wilshire Associates is consultant on both proposals, which will be considered by the board Dec. 12.