CalPERS terminated its 21-year relationship with private equity manager Pacific Corporate Group and found new managers for the $2 billion committed to five PCG funds, according to a news release from the fund.
According to the $216.4 billion California Public Employees’ Retirement System’s latest performance review, the Sacramento-based system’s investments with PCG Asset Management, the consulting and money management subsidiary of PCG, totaled $872 million as of March 31.
The change comes as CalPERS’ investment staff continues their strategic review of the system’s private equity program and investment partners. The market value of CalPERS’ Alternative Investment Management Program, the system’s private equity program, was $28 billion as of March 31.
“CalPERS is restructuring its private equity portfolio, which includes placing assets with the best-suited managers possible. We can’t comment beyond this information,” Clark McKinley, a CalPERS spokesman, wrote in an e-mail response to questions.
David Fann, PCG Asset Management’s president and CEO, could not be reached for comment.
“Pacific Corporate Group has had the successful opportunity to serve CalPERS as a fiduciary for over 20 years and has generated a net IRR in excess of 23% while producing over $3 billion in investment gains to enhance the retirement security of CalPERS beneficiaries,” Brian Maddox, a PCG spokesman, wrote in an e-mail response to a request for comment.
Aviva Capital, a former joint venture partner with PCG, will continue to manage $1.3 billion of invested and committed capital in two emerging markets investment vehicles for CalPERS, Mr. McKinley confirmed. The PCGI Global Opportunities 1 and 2 funds were launched in 2007 and 2008, respectively.
According to CalPERS’ news release, Aviva Capital’s team is setting up an independent company.
CalPERS hired private equity firm Capital Dynamics to assume management of the Clean Energy & Technology fund, which PCG launched for the fund in 2007. CalPERS has committed $480 million to the fund.
Capital Dynamics is one of the managers on CalPERS’ preapproved private equity manager list and will not receive an additional allocation from the pension fund, according to the news release.
Responsibility for winding down the two CalPERS/PCG Corporate Partners funds, to which CalPERS committed a total of $500 million in 2001, was given to KMCP Advisors, a private equity manager formed by some former members of PCG’s investment team for the two funds. KMCP will manage the “harvest period” for the two funds, which will be closed over the next few years, according to the news release.
“We’re pleased to continue to support the Aviva team and are confident in their capability to succeed as an independent manager,” Joe Dear, CalPERS’ chief investment officer, said in the release.
“This new relationship (with Capital Dynamics) and the repositioning of the assets with the new independent teams is part of the systematic restructuring of our private equity program to reposition our assets and focus on improved performance, accountability and transparency with our partners,” he said in the release.
According to PCG’s website, CalPERS was the private equity manager’s first public pension plan client. CalPERS hired PCG in 1989 to “design and implement the system’s inaugural Alternative Investment Management Program,” according to the firm’s website.
CalPERS’ AIM program returned 30.9% for the year ended March 31.
