July 2, 2015

External Affairs
(916) 795-3991
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Joe DeAnda, Information Officer

Pension Fund Will Disclose Total Carried Interest This Fall

SACRAMENTO, CA - The California Public Employees' Retirement System (CalPERS) today announced that it will report the total carried interest paid to the General Partners (GP) of the private equity investment funds it invests for the fiscal year ending June 30, 2015. The data is targeted for release this fall, representing the culmination of a multi-year systems and data collection initiative.

Carried interest represents the profit shared with the General Partners of the System's more than 700 private equity funds.

"This is a major milestone and accomplishment, something we have been collectively focused on for the past three years," said Ted Eliopoulos, Chief Investment Officer for CalPERS. "We are pleased that we can provide transparency and detail around the carried interest going forward."

CalPERS staff identified a need to better track and report fees, carried interest, and other portfolio and fund level data in private equity in 2011, and has been working to develop the Private Equity Accounting and Reporting Solution (PEARS), in order to comprehensively report carried interest and other information from private equity investments.

CalPERS has used industry templates developed by the International Limited Partners Association (ILPA) to collect the necessary data. The pension fund was an early adopter of the ILPA standardized capital call and distribution reporting template for GPs when it was released in 2012. CalPERS continues to work with ILPA to increase usage and completion of this template across the private equity industry and in its own portfolio and remains an active participant in the ILPA working group focused on this topic.

"This is important work for the private equity industry, and we are grateful that CalPERS is lending its considerable institutional reach and influence to propel this initiative," said Peter Freire, Chief Executive Officer for ILPA.

Since the beginning of 2015, 94 percent of CalPERS GPs have provided the pension fund with information on partner level carried interest amounts deducted from the CalPERS gross returns with each cash distribution. Approximately 6 percent have declined to provide the necessary information to date, and CalPERS continues to follow up with these partners.

CalPERS has also asked its current private equity GPs to provide the pension fund carried interest since inception.

"Historically, fees and carried interest in the private equity industry have not been consistently reported by private equity managers," said Eliopoulos. "A complex portfolio like CalPERS with a wide variety of economic terms and agreements that span a decade or more requires a comprehensive solution for accounting, tracking, and reporting of fees and carried interest."

The pension fund initiated these efforts because its legacy private equity accounting system does not have the ability to accurately and comprehensively capture, calculate and aggregate carried interest. CalPERS has been able to identify the total management fees paid to private equity partners -- totals that are included by partner in its annual report. It is important to note that CalPERS reported annual returns and net asset values are based on audited financial statements received from each partner, and are already reported net of fund fees, other expenses, and carried interest.

For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.7 million members in the CalPERS retirement system and administers benefits for 1.4 million members and their families in our health program. CalPERS' total fund market value currently stands at approximately $303 billion. For more information, visit www.calpers.ca.gov.