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CalPERS private equity program shows performance turnaround after 2022 strategy overhaul
Summary
CalPERS staff reported that a private equity strategy overhaul begun in November 2022 has produced improved returns versus the private‑equity universe and peers, while growth in co‑investing, secondaries and diversified manager sourcing has expanded scale and cut implementation costs.
CalPERS staff told the Investment Committee that a sweeping 2022 strategy overhaul of the private equity program has produced measurable improvement in benchmark and peer comparisons while providing greater scale and cost efficiency.
Anton Orlich and the private equity team described a multi‑year shift toward a more diversified private equity program that increases allocations to growth and venture, moves buyouts toward the middle market, expands co‑investment and secondary activity, and targets greater representation of diverse and emerging managers. Staff reported a net asset value near $92 billion (approximately 17.5% of total fund) and said the program expects fiscal‑year commitments near the stated target of $15.5 billion.
Performance: staff presented time‑weighted and IRR comparisons showing the retooled strategy moved CalPERS from underperforming the private equity opportunity set to outperforming on recent 1‑ and 3‑year measurements and closing a multi‑year shortfall on a five‑year IRR basis. Staff said customized investment accounts and co‑investments have accelerated deployment and are a structural alpha source; Colin Crane projected large fee savings from increased co‑investment usage.
Diversity and governance: staff said the program committed over $6 billion in the most recent fiscal year to diverse managers and about $2 billion to emerging managers (reported under AB 890). The team said it has obtained signatures from 100% of active managers on CalPERS’ labor principles and is expanding manager participation in the ESG Data Convergence Initiative (EDCI).
Trustees pressed staff on transparency and selection details for the MOSAIC intermediated program (TPG NEXT and Grosvenor Elevate). Director Jose Luis Pacheco and others asked for a detailed, aggregated report on MOSAIC applicants and selection methodology (applicant counts, demographics, strategy, and pipeline conversion) and asked staff to bring partners to the July off‑site to explain their evaluation processes. Staff said partners will attend the July session and that additional disclosure and aggregated reporting is forthcoming.
Ending: Trustees praised the performance improvement and the increased scale but directed staff to provide more disclosure about the MOSAIC selection process and to continue reporting diversity and ESG implementation metrics.
