Under pressure from state lawmakers and groups representing minority and women-owned private equity managers, the $269.1 billion California Public Employees' Retirement System has launched a task force to address how it can better evaluate which emerging private equity firms to fund.
The task force's creation comes as the nation's largest defined benefit plan has been reducing the amount of capital commitments it makes for funds being raised by emerging private equity managers specifically and all private equity managers in general due to the slowed economy.
The Sacramento-based pension fund has been one of the leaders in hiring emerging private equity managers. A CalPERS capital commitment can be a national seal of approval that can help fledgling firms attract other investors and become successful.
CalPERS defines emerging managers in the private equity area as those raising their first or second fund. Many are also owned by women or minorities, but under California law, racial or gender preferences cannot be considered in the selection process.
But race, ethnicity and gender are issues underlying the debate.
Several informed sources, who would only speak anonymously, said the task force's creation helped put the lid, at least for now, on what CalPERS officials viewed as a lengthy and unwarranted state audit of CalPERS' emerging manager programs.
The audit was being pushed by state Sen. Ricardo Lara, a Long Beach Democrat and vice chairman of the California Legislature's Joint Committee on Legislative Audit, as well as chairman of the California Latino Legislative Caucus.
In an e-mail to Pensions & Investments, Mr. Lara said “one of my priorities is to ensure that California is working toward expanding management and leadership opportunities to Latinos and minorities in general. ... I am pleased that CalPERS is committed to looking at its policies and procedures.”