CalPERS Looks to Cut Two-Thirds of Private Equity Managers

cutting a one dollar bill in half

As part of its quest to reduce overall costs, CalPERS announced on Monday that the fund would be cutting the number of private equity managers it employs.

The cuts could be deep – the pension fund currently has 291 such managers, but that number could fall to below 100.

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Eliopoulos told the Financial Times he would use “every possible lever” to cut costs, and indicated that the number of managers CalPERS uses for private equity could fall below 100, from 291 currently. He voiced a desire to team up with other investors on big deals

“By having fewer managers, at larger scale, we will be able to reduce our overall costs,” Eliopoulos said.

However, there are no signs to indicate that CalPERS will reduce its overall exposure to the asset class, as it has with hedge funds. Eliopoulos said he wanted to “make sure we still have access to the talent that we need”, and the pension is currently advertising for a portfolio manager for its Sacramento, California-based private equity team.

The decision to create a more concentrated portfolio reflects a growing trend in the sector: Larger, established managers are finding it much easier to raise cash for new funds than newer players.

Recent research from Preqin showed that funds launched last year by managers new to the private equity sector accounted for 7% of the $486 billion raised in 2014, the same proportion as in 2013.

CalPERS invests about 10 percent of its portfolio in private equity.


Photo by TaxRebate.org.uk via Flickr CC License

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