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Sacramento County puts Carlyle Group on watch

Sacramento County (Calif.) Employees' Retirement System put Carlyle Group on watch, documents from the $9.6 billion pension fund show.

Carlyle announced in September its plans to exit the Asia real estate business by the end of the year, with the existing management team spinning out as a separate business and continuing to run the current investments. Following the spinoff, the current fee management structure that SCERS and Carlyle agreed upon is expected to remain the same.

Because of "the change in management structure and increased risk of further management team departures, the investment with Carlyle has been added to the watch list," the documents said.

Steve Davis, chief investment officer for the Sacramento system, said in an email there is no timeframe to make a decision on Carlyle. "SCERS will evaluate the manager going forward," he added.

The system has $6.1 million with Carlyle China Realty and $39.8 million with Carlyle China Rome Logistics, both Asia-focused opportunistic real estate funds. It also has $16 million in Carlyle Power Partners II, an energy fund targeting power generation assets, but Mr. Davis clarified that this fund is not on the watch list.

"Spinning out our China Real Estate team into a standalone business will help ensure team continuity and optimal returns for our investors," Carlyle spokesman Christopher Ullman said in an emailed statement. "Han Chen and his team will continue to manage the assets, and Carlyle will still be the ultimate decision maker and hold a significant equity stake in the investments."

SCERS' total real estate exposure was 9.5% as of June 30.