CalPERS launches $500M state fund
BYLINE: by Vyvyan Tenorio
HIGHLIGHT: The pension fund will invest in private equity and venture funds and make direct co-investments.
The California Public Employees' Retirement System is launching a $500 million private equity fund to invest in companies in underserved markets, primarily in California.
Half of the fund, to be managed by investment advisory firm Hamilton Lane Advisors Inc. of BalaCynwyd, Pa., will be allocated to California-based private equity funds and the other half to direct co-investments in California-based companies.
The initiative is part of an ongoing effort at CalPERS, which began the program in 2001 with a $475 million allocation.
"By deploying capital in markets that have been overlooked by most mainstream sources of capital, the [program] has had a positive impact on the economic infrastructure of the state's underserved markets," Charles Valdes, chairman of CalPERS' investment committee, said in a statement.
The pension fund said the fund is one of several new investment vehicles that it will roll out in the coming months under a strategic realignment that began earlier this year.
With $25 billion in alternative assets committed to about 450 funds, CalPERS had been hampered by its size and bureaucratic structure. Last year, it adopted a plan to streamline the investment process, relying on several key partnerships to which it will directly allocate more capital over time.
The initial $475 million vehicle was invested in nine venture capital and private equity funds and one fund-of-funds. Among the largest allocations went to: Yucaipa Cos.' Corporate Initiatives Fund, which received $200 million; Green Equity Partners' CA Opportunity Fund, $50 million; and Levine Leichtman Capital Partners's California Growth Partners, $50 million. Draper Fisher Jurvetson's Central fund, which focuses on the state's largely ignored Central Valley region, received $20 million.
According to a report by consultants, LP Capital Advisors and Pacific Community Ventures, as of June 30, 2005, private equity funds that received capital through the initiative had active investments in 83 companies, with 48 of these headquartered in California. It was showing a 16.3% annual return.