CalPERS assembles all-star panel for emerging manager review

• Pension fund seeks to end rift

• System recently hired Cambridge Associates

• Panel will seek consensus on best practices

 

CalPERS has been assessing the program since at least last year, when a ton of pressure was brought to bear on the system by the emerging manager community, which accused the largest pension fund in the U.S. of abandoning the strategy.

The rift grew so large that CalPERS staff skipped out on the annual Robert Toigo Foundation gala – the premier event for the emerging manager community, and one that CalPERS had long been a part of.

It grew worse when CalPERS fired its emerging private equity fund of fund manager Centinela Capital Partners, to which it had committed $1 billion over several years, and hired the former Credit Suisse Customized Fund Investment Group with a $100 million allocation.

Since then, the system has worked hard to counter the opinion that it has abandoned emerging managers.

The system recently hired Cambridge Associates to conduct a review of the emerging manager program, to identify “lessons learned and adopt best practices for evaluating investment managers and potential commitment of new capital to emerging managers.”

Cambridge has been conducting a review of 10 to 12 emerging managers in CalPERS’ portfolio to identify characteristics that contribute to the success of an emerging manager, according to documents from the pension system.

The consultant is set to present its findings to the all-star panel. The panel is expected to seek consensus on best practices, according to CalPERS documents. The panel is set to begin its review on Dec. 17 and subsequent reviews will occur as Cambridge finishes its reports, the documents said. A panel report will be delivered to CalPERS’ investment committee in March, the documents said. CalPERS expects a full presentation of the findings at its Emerging and Diverse Manager Spring Forum on April 1, 2014, the documents said.

The panel is made up of an impressive mix of CalPERS investment staff and outside experts.

CalPERS investment staff includes senior investment officer for real assets Theodore Eliopoulos, senior investment officer of private equity Real Desrochers, private equity senior staffers Christine Gogan, Sarah Corr and Scott Jacobsen, as well as senior portfolio manager Laurie Weir. Mike Moy and Allan Emkin of Pension Consulting Alliance will join the panel.

External market participants on the panel include Matt Barger, senior advisor at Hellman & Friedman; Maria Contreras-Sweet, executive chairwoman, ProAmerica Bank; Holly Holtz, managing director at Shinrun Advisors; John McLaren, co-founder and senior advisor at Monument Group; Hilda Ochoa-Brillembourg, chief executive and CIO at Strategic Investment Group; Paul Rice, senior advisor at Mesirow Financial; Howard Sanders, managing director at Auldbrass Partners; Roger Sit, CEO and global CIO at Sit Investment Associates and Ambassador Linda Tsao Yang of the Asian Development Bank.

Meanwhile, CalPERS has made at least one commitment to an emerging manager, allocating funds to Peak Rock Capital Fund through Customized Fund Investment Group. Peak Rock closed its debut fund on $700 million earlier this year.

The system has two other commitments to emerging private equity managers pending, CalPERS’ documents said.

CalPERS also has a $200 million emerging manager program within its real estate portfolio, from which it has made commitments to Rubicon Point Partners, Pacshore Partners, Sack Properties and Paragon Commercial Group, according to the documents.

Chris Witkowsky is editor of peHUB