Private Equity Allocations are Higher, and So is Demand for Fewer Names

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The California Public Employees’ Retirement System (CalPERS) is seeking to narrow the number of private equity managers they deal with. 389 managers are in the pension’s US$ 42 billion private equity program, CalPERS wants to chop that number down to less than a third. On December 16, Réal Desrochers, senior investment officer of the private equity program at CalPERS, told the pension investment committee of their goal to dwindle down to around 120 managers. The ex-CalSTRS private equity allocator believes having fewer private equity relationships would allow the pension to better monitor strategies. The slim down strategy encompasses making more concentrated plays with high-performing general partners versus massive diversification, essentially mimicking a private equity index. This strategy is being reflected by U.S. pensions like California State Teachers’ Retirement System (CalSTRS) and the Teacher Retirement System of Texas (TRS). TRS already inked strategic relationships with KKR and Apollo Management. In 2011, the TRS had around 111 relationships in their private markets portfolio – much smaller than CalPERS.

This strategy of reducing the number of relationships with private equity and other asset managers has blossomed.

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