The California Public Employees' Retirement System sold about $6 billion of its stakes in private equity funds to secondhand buyers, severing ties with a slew of past managers and freeing up cash for new wagers.
The $441.7 billion public pension fund, the largest in the U.S., has cycled through four investment chiefs since 2009 and has long wrestled with the complexity of its $50 billion in private equity holdings. CalPERS hired Jefferies Financial Group to explore ways to clean up its portfolio and shop a swath of assets, according to people familiar with the matter.
Lexington Partners, an investment business of Franklin Resources, and CVC Capital Partners' Glendower Capital snapped up pieces in separate sales that wrapped up over the past two weeks, said the people, who asked not to be identified discussing private transactions. The deal is not only the largest of its kind by CalPERS, but private equity executives said it's probably the biggest-ever involving secondhand fund stakes changing hands.
Trading in such size came at a price: CalPERS sold its holdings at a roughly 10% discount to their value in September 2021, some of the people said. The fund softened the blow thanks in part to how it structured the deal, they said.
The blockbuster transaction generates money for investment chief Nicole Musicco, who took over earlier this year, to make new wagers as markets remain volatile. She has told CalPERS directors that she wants to build a team that would buy stakes in private companies. That would let CalPERS gain more control and bypass private equity firms like Blackstone or Carlyle Group.
"The sale positions us to act on our new asset allocation and allows us to capitalize on market opportunities," Ms. Musicco said in a statement to Bloomberg. CalPERS drew up plans last year to increase private equity and grow private debt.
Representatives for Lexington, Glendower and Jefferies declined to comment.