CalPERS: ‘Discussing’ capital call timings with GPs ‘not unusual’

While stressing it continues to honour capital calls, CalPERS has said it is not atypical for it to ask GPs to delay requests for funds. The pension has confirmed it sold more than $2bn in private equity holdings on the secondary market last year, including interests in Carlyle and Landmark funds.

Market sources say the California Public Employees’ Retirement System has asked some of its general partners of private equity funds to delay capital calls as the $184 billion pension manages the impact of the financial crisis on its investment portfolio.

While a CalPERS spokesman declined to comment on “private communications” with fund managers, he said: “Generally, it's not unusual for us to consult with partners about the timing of capital calls.”

The US pension giant, he said, has “sufficient cash and liquidity to meet our contractual commitments with partners and are continuing to honour capital calls and even invest in new relationships”.

He added that ratings agency Standard & Poor's recently affirmed its top credit rating for CalPERS, confirming it has sufficient funding and liquidity to meet its short-term commitments.

CalPERS also revealed further information this week of the $2.1 billion in fund interests it auctioned off in a number of secondary transactions late last year. CalPERS said it sold off 21 percent of its private equity fund interests in secondary deals starting in the third quarter of 2007 and finishing in August 2008.

Without disclosing specific details about the funds, CalPERS said it sold 80 partnerships comprised of 60 different GP relationships across private equity strategies including buyouts, venture and distressed debt.

“We can't specify how much more we gained from the sale in 2007, when the market was peaking, than if we had tried to sell it today,” the spokesman said.

“In today’s market, we would have had hundreds of millions in losses,” Leon Shahinian, CalPERS senior investment officer, said in a statement.

A comparison of CalPERS’ alternative investment management annual reports from June 2007 and June 2008, shows 151 funds that were present in the 2007 report but are not in 2008.

The spokesman would not comment on the fund comparison, except to say that 80 of the funds that do not appear in CalPERS’ latest alternative investments report were sold in the secondary market, while seven of them finished their natural life cycle. He said the pension could not comment about the remaining funds because of legal constraints.

Funds that did not appear in the 2008 report include several from Thomas Weisel Partners, three Landmark Partners funds, three JPMorgan funds, four Behrman Capital funds and four funds from The Carlyle Group. 

CalPERS has been “scrubbing” its private equity portfolio to ease the administrative burden of overseeing “hundreds” of funds. UBS developed a list of funds for CalPERS’ to sell in 2006, the pension said.

The pension’s most recent commitment was $500 million to The Blackstone Group’s sixth buyout fund, which is targeting between $15 billion and $20 billion. It marked a steep decrease from the $750 million commitment CalPERS made to the buyout firm’s previous fund.

CalPERS’ actual allocation to its alternative investment programme reached 10.5 percent in September, above its target allocation of 10 percent but still within its target range of 7 percent to 13 percent.