CalPERS’ investment officials are negotiating with private equity companies to create new separate account investment vehicles exclusively for the $225.5 billion system, a knowledgeable source Friday at the pension system.
The source, who is familiar with investment operations at the California Public Employees’ Retirement System, Sacramento, said system officials feel they can exert more control over their general partners in private equity deals, including lower fees, if they are the sole investment partner.
Traditionally, CalPERS has participated as a limited partner in private equity deals along with other investors. The system had $34 billion in private equity as of Sept. 30.
The source said he did not know which private equity companies had been involved in the negotiations. CalPERS has existing contracts with firms such as Apollo Global Management, Kohlberg Kravis Roberts and Carlyle Group. CalPERS owns a minority stake in both Apollo and Carlyle.
Wayne Davis, a spokesman for CalPERS, said the retirement system would have no comment.
If a deal is completed, CalPERS would become the third public U.S. retirement system to restructure its relationship with private equity companies in recent months.
In November, the $101 billion Texas Teacher Retirement System, Austin, said it would invest $6 billion a variety of asset classes, including private equity in separate accounts managed by KKR and Apollo Global Management.
In early December, the $69.6 billion New Jersey Division of Investment, Trenton, agreed to a similar deal with Blackstone, investing $1.8 billion in a separate account.