CalPERS seeks permanent replacement for Desrochers

California Public Employees’ Retirement System is seeking a permanent replacement for former private equity chief Real Desrochers, who left the retirement system last year for a position with CITIC Private Equity Funds Management Co.

CalPERS’s new managing investment director will be responsible for developing allocation and investment strategies across a range of private equity structures, including strategic partnerships, co-investments and direct investments, according to a job listing published through a state careers website.

CalPERS posted the job opening on California’s careers website in January, nine months after Desrochers stepped away from his role at the retirement system.

It’s unclear how those responsibilities would change should CalPERS move forward with a plan to put an outside firm in control of new private equity investments. The retirement system solicited proposals from AlpInvest Partners, BlackRock, Goldman Sachs, Hamilton Lane, HarbourVest Partners and Neuberger Berman to help manage the $27 billion PE portfolio.

The specifics of such a partnership haven’t been finalized and board members still have questions about the feasibility and effectiveness of such a plan.

“To me, it’s a hypothesis right now, a theory. [Its effectiveness] can’t be proven or disproven for another decade, and that’s a pretty big risk,” board member Margaret Brown told Buyouts earlier this year. “Looking at the economics, it doesn’t make sense.”

Some board members, as well as former board member JJ Jelincic, have encouraged staff to explore the possibility of hiring professionals with direct investment experience, rather than tapping a third party. Forming a strategic partnership with an outside firm might result in higher investment-related costs, which could create political headaches for certain members of the board.

The retirement system paid $455 million in external management fees to private equity firms during the 2016-2017 fiscal year.

The new managing investment director could make as much as $428,000 per year in salary. Investment staffers are also eligible for incentive compensation as well.

Desrochers received a little more than $500,000 in total compensation in 2016, according to a Sacramento Bee database of state employee salaries.

Sarah Corr, who worked under Desrochers, has overseen the retirement system’s private equity program on an interim basis since Desrochers departed in April.

CalPERS has been an active investor since then, inking $500 million-plus commitments with Apollo Global Management and CVC Capital Partners. In January, the retirement system committed $75 million to Clearlake Capital Group’s new fund.

Action Item: To read more about the position, visit http://bit.ly/2p7GRPp

Photo of Real Desrochers courtesy of CalPERS