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Pension Funds

CalPERS interviewing candidates to lead private equity partnerships

Updated with correction

CalPERS officials have interviewed David J. Roux, a co-founder of Silver Lake, and Adam Grosser, a senior adviser, who oversaw Silver Lake's growth capital investments in the operations, energy and resources sectors, to lead two outside private equity partnerships.

The two are among the "fair number" of candidates for the top spots in the partnerships, in which the $339.9 billion pension plan would at least in the beginning be the sole investor, spokeswoman Megan White said in an email.

Staff of the California Public Employees' Retirement System, Sacramento, is expected to come to the board with an agenda item concerning its new private equity investment model, which includes two independent CalPERS-funded partnerships, in February, with a staff workforce strategic plan expected to be presented to the investment committee in March, according to the timeline shared with the investment committee in December.

However, most of the work in creating a new private equity investment model, including the hiring decisions, has been delegated to staff. The investment committee's role will be to decide whether it would delegate authority to staff to make multiyear commitments of capital to the two outside partnerships above the current delegation limitations, according to a Dec. 17 report to the investment committee. Staff has been working on the new investment model without a permanent head of private equity. CalPERS' former managing investment director of private equity left in 2017.

Ms. White said she does not know the number of candidates that have been interviewed to lead each of the two outside partnerships. However, sources said that CalPERS officials have interviewed eight individuals.

CalPERS has a long relationship with Silver Lake. In 2008, CalPERS took a 9.9% stake in the technology-focused private equity firm. Under the arrangement, CalPERS — which at the time had invested more than $700 million in four Silver Lake funds — would make additional commitments as a limited partner, and a CalPERS official would join Silver Lake's management advisory board. CalPERS would also provide seed money to new Silver Lake funds.

CalPERS has since sold the stake.

In fiscal year 2018, CalPERS paid Silver Lake more than $5 million in management fees in four vehicles, Silver Lake Partners III, Silver Lake Partners IV, Silver Lake Partners V and SL SPV-1, according to CalPERS' latest comprehensive annual financial report. All of those fund commitments were made after CalPERS took its stake in Silver Lake.

In CalPERS' new private equity investment model, the pension plan would not pay management fees to the two outside partnerships but would fund an operations budget.

The operations budget would be used, in part, to staff the partnerships.

Most of the work, including hiring executives to lead the outside partnerships, is being done by staff on its own, under authority delegated to it by the investment committee, John Cole said in an interview with Pensions & Investments in November.

Silver Lake spokesman Harry Mayfield declined comment.