Private Equity

CalPERS names new private equity head, continues benchmark discussion

Greg Ruiz will be joining CalPERS as the new managing investment director for private equity, CIO Ben Meng announced at Monday's investment committee's meeting.

He replaces Real Desrochers, who left the pension fund more than two years ago. Mr. Desrochers now is a managing director at CITIC Private Equity Funds Management, the private equity arm of CITIC Capital Partners, which invests in China, Japan, U.S. and Europe. Sarah Corr has been serving as interim managing investment director for private equity since Mr. Desrochers' departure.

Mr. Ruiz will be joining the $360.3 billion California Public Employees' Retirement System, Sacramento, in the summer. He is currently a principal at Altamont Capital Partners, where he focuses on consumer, business services, and technology sector investments.

"Greg has worked his whole career in private equity," Mr. Meng said. "He understands the complex nature of the asset class and will be a wonderful addition to our team."

Mr. Ruiz also has family members who are CalPERS members "so his commitment to our mission is already very strong," Mr. Meng said.

Separately, staff is the process of reviewing all of CalPERS' benchmarks and how to align them with the pension plan's long-term goal, it's 7% expected rate of return, Mr. Meng said.

Currently, CalPERS uses a benchmark for its private asset classes as a comparison to outperformance over a public asset class. Mr. Meng said that an absolute benchmark "may be better aligned with our long-term goal," he said.

"Just something for the board and our office to think about, relative to a (public) benchmark … or should they be benchmarked to our long-term goal where they should deliver the 7% return," Mr. Meng said.

Mr. Meng spoke during an investment education workshop during Monday's investment committee meeting presented by Jeffery V. Bailey, a finance lecturer at the University of Minnesota and a senior director, benefits, at Target Corp.

"And I understand where Ben is coming from on all that of, a lot of organizations do have that as a target … I don't know of anything out there that I can guarantee 7% from. So I have to have an alternative that I could invest in as it delivers 7% if I were going to go that route," Mr. Bailey said.

Board member Eraina Ortega said that benchmark discussions can raise conflict issues.

She noted that many times benchmark discussions arise because a particular asset class underperformed its benchmark.

"And then the discussion is how the benchmark doesn't really reflect where the investments were made and then it becomes hard to evaluate that from a board member perspective because you were tying it to a (staff) compensation outcome," Ms. Ortega said. "So kind of related to the issue as you raised, Mr. Meng, looking at total fund performance and other ways of thinking about it, are there other models of compensation out there as well that maybe don't tie … direct performance compensation to the benchmark on particular asset classes?"

In response, Mr. Meng said, "You're absolutely right."

He deferred the benchmark discussion to the June investment committee meeting.

"One of the functions of a benchmark is performance evaluation," Mr. Meng said. "The question … we're considering now is … how to define success" for the investment team.

Some organizations measure outperformance relative to a benchmark for the short term and an absolute-return benchmark for the long term, he said.

"It's very difficult to achieve both goals at the same time," Mr. Meng said.

"But that's the struggle or challenge we face and we look forward to working with you and the team to find a better solution."