The California Public Employees’ Retirement System has set up a $400 million separate account with GSO Energy Partners, according to documents released by the $263.9 billion retirement system.
GSO sees “a lot of opportunities that may not fit into other GSO funds, and CalPERs was interested in having a separately managed account,” said one source with knowledge of the commitment.
The Blackstone Group and GSO declined to comment.
CalPERS already has a $500 million separate account through Blackstone, GSO’s parent organisation. That mandate, which the retirement system granted in 2012, targets investments that would not fit in the firm’s current private equity, real estate and credit mandates. The New Jersey Division of Investment has also committed to a customised account through Blackstone Tactical Opportunities, which is targeting $3 billion to $5 billion in commitments, according to state documents.
A growing number of public pensions and institutional investors have engaged asset managers to establish separately managed accounts, which generally have more flexibly opportunistic mandates than traditional co-mingled vehicles. Furthermore, general partners have been known to relax fund terms and fees for those vehicles, as most accounts tend to be quite large.
“I think it would be better if fees came down generally for all investors and that the carry was adjusted more appropriately,” CalPERS CIO Joseph Dear told sister publication Private Equity International in an interview last year. “But if that’s not going to happen, then investors with strategic positions and the capability to make large commitments should go forward and make more sensible arrangements with the managers. We’ve now seen proof in the marketplace that that’s possible to do.
“If you’re going to have fewer relationships and maintain the size of your programme, then the size of your commitment is going to go up. It only makes sense from a business standpoint to leverage those large commitments against better alignment of terms and conditions,” Dear said.
Chelsea Stevenson contributed to this report.