CalPERS credit related PE up 20.78%

The credit portfolio outperformed CalPERS' 16.03% benchmark for private equity strategies, the only sub-segment to do so.

The California Public Employees’ Retirement System $4.9 billion credit-related private equity portfolio generated a 20.78 percent return for the fiscal year ending 30 June, according to data released by CalPERS Thursday.

The credit portfolio’s performance outperformed the $257.9 billion retirement system’s total private equity performance benchmark by 475 basis points according to the data. CalPERS does not set benchmarks for individual strategies within the $31.3 billion private equity portfolio, which also includes venture capital, buyout, opportunistic and growth expansion funds.

Overall, CalPERS’ private equity portfolio generated a 13.59 percent return for the fiscal year ending 30 June, falling short of its 16.03 percent performance benchmark by 2.44 percent.

Credit was the only strategy to outperform the 16.03 percent performance benchmark. Opportunistic underperformed the benchmark by 905 basis points; venture capital by 641 basis points; growth expansion by 491 basis points and buyouts by 286 basis points.  

The asset class was also a top performer for CalPERS during the first quarter, when credit-related private equity generated a 23.6 percent return on a one year basis. Although credit comprised only 17 percent of the private equity portfolio at that time, its performance accounted for approximately a third of the then-$32 billion portfolio’s 13.8 percent return through 31 March, according to a Pension Consulting Alliance report from the investment committee’s May meeting.

The strong performance CalPERS’ portfolio is indicative of why other California pension systems have hiked their allocations to credit-related private equity funds and other related strategies in recent years. The Los Angeles City Employees’ Retirement System, The San Diego City Employees’ Retirement System and the Orange County Employees’ Retirement System have all boosted their commitments to credit strategies recently.