The largest pension in America just named a new chief for the nation’s largest private equity program. Réal Desrochers was named senior investment officer in charge of private equity at the California Public Employees Retirement System. CalPERS’s private equity portfolio has about $33 billion in assets and $49 billion in committed capital.
Overall, CalPERS has $236 billion under management and provides benefits to some 1.6 million people. Desrochers will report to Joe Dear, CalPERS’ chief investment officer.
Desrochers is a familiar name in private equity, most notably as director for alternative investments at the $155 billion California State Teachers Retirement System, the state’s other giant pension. During his 11 years at CalSTRS, Desrochers more than quintupled the size of its private equity program to $17 billion, and garnered average annual returns of 17.5 percent. He left CalSTRS in 2009.
Most recently, Desrochers was chief investment officer of Saudi Arabia’s first sovereign wealth fund, the $5.3 billion Saudi Arabian Investment Company, which launched in 2008. Before CalSTRS, Desrochers spent 11 years at the $157 billion Caisse de Depot of Quebec, Canada’s largest pension.
“I’m extremely confident in Réal Desrochers and his skills leading our team of investment professionals,” said Joe Dear, CalPERS’ chief investment officer, in a written statement. “He did a fine job in overseeing the private equity program of our sister fund, CalSTRS.”
The appointment is especially significant given the timing. Desrochers takes over the key role that had been occupied by Leon Shahinian, who was placed on administrative leave more than a year ago in the wake of CalPERS’s pay-to-play scandal. Shahinian was identified in a pay-to-play lawsuit brought by former state attorney general (and now governor) Jerry Brown. Shahinian resigned in Aug. 2010.
In addition, a number of private equity portfolio managers were recently identified for possible gift-policy violations by California’s Fair Political Practices Commission.
At CalSTRS, Desrochers built up the program by making fewer, yet larger, private equity bets, expanding the range of investments to include co-investments, secondary investments and private equity investments spread out by geography.
Chris Ailman, Desrochers’s former boss and CalSTRS’s chief investment officer, praised his former colleague in 2009 for using “a disciplined approach that included limiting our involvement to very few partners, the cream of the crop.”