The Facts on CalPERS Private Equity Program
A History of Success
Since our private equity program began in 1990, our investment returns (net of fees, including carried interest) have averaged:
- 1-year: 8.9 percent
- 3-year: 14.1 percent
- 5-year: 14.5 percent
- 10-year: 12.2 percent
- 20-year: 12.3 percent
During these time periods, the returns have outperformed our peers in public pensions, according to an August report to the CalPERS Board of Administration.
A Focus on Due Diligence
CalPERS invests in private equity as a Limited Partner, or LP, solely through the use of external investment managers, known as General Partners, or GPs. We have a rigorous and comprehensive due diligence system in place for selecting external investment managers and evaluating private equity investment proposals, and for continuously monitoring of our private equity investments.
For example, all investment proposals must be submitted online on a standardized template via our Investment Proposals Submission webpage, and their review follows consistent and thorough underwriting policies and procedures. All investments are also reviewed by third-party investment advisors and independent investment consultants.
Our proprietary Manager Assessment Tool (MAT) provides a fair and uniform process that allows private equity staff to fully evaluate the external manager landscape. In an analysis, Cambridge Associates, an independent consultant, has praised us for policies and procedures, including the MAT, that are, in many cases, better than industry best practices for external investment manager selection and due diligence.
A Commitment to Transparency
CalPERS provides detailed portfolio and performance reports to the CalPERS Board on a monthly, bi-annual, and annual basis. The reports are public information and available on our website. Additionally, our website contains a Private Equity Program Fund Performance Review tool that offers detailed performance data for every private equity fund in which we invest.
We have been working for over three years to increase transparency and improve our reporting of private equity metrics. We have just launched one of the most comprehensive reporting systems in the industry, the Private Equity Accounting and Reporting Solution (PEARS). PEARS will enable us to exhaustively track all our investments, including carried interest, providing greater transparency to the program. We'll be releasing comprehensive carried interest information later this year.
A Passion for Leadership
CalPERS has advocated for greater transparency and reporting of fee information since our private equity program began 25 years ago.
We were co-founders in the early 1990s of the Institutional Limited Partners Association (ILPA), a global, member-driven organization dedicated to advancing the interests of private equity Limited Partners through education, research, and advocacy. Working with ILPA, we have continually pushed for procedural and cultural changes throughout the private equity industry. With our support, ILPA has just launched an initiative aimed at creating more robust and consistent standards for fee and expense reporting and for compliance disclosures in the private equity industry. Read the news release announcing this program.
We also support the work of the Securities and Exchange Commission to bring additional transparency to the private equity industry, and are at the forefront of the many investors taking steps in that direction.