How to avoid losing $18 billion

Calpers executes its private markets strategy

Happy Monday. Here’s what we’ve got today…

  • No headline deals in favor of a deeper look at Calpers’ alternative assets strategy

  • The deal sheet, plus the year’s best books (according to executives)


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Most of this year’s fundraising news has focused on a slowdown in activity and a bigger-than-usual lift for investors hoping to close their latest funds. While it’s true that many limited partners have been tapped out, there’s one allocator that evidently has a lot left in the tank: Calpers.

Through June of this year, filings show the California Public Employees’ Retirement System has committed more than $14 billion to 2023 vintage alternatives strategies across private equity, venture capital, private credit, and real assets.

That’s included nearly $1 billion to TPG, $830 million to Crosspoint Capital, $750 million each to Brookfield and IFM, $703 million to Permira, and more than half a billion each to Hellman & Friedman, Leonard Green, Francisco Partners, CD&R, General Catalyst, and Bain Capital, among others.

Andreessen Horowitz, Silver Lake, CapVest, Vitruvian, Patient Square, and Welsh Carson have all bagged more than $250 million.

What’s Going On?

Calpers believes its $466 billion portfolio is underallocated to private markets, based on benchmarking to peers and a returns profile that’s outperformed the fund’s other investments.

On the back of those returns, Calpers is expected to adjust its target private equity allocation in March from 13 to 17 percent, and its private credit from 5 to 8 percent.

The fund also noted it was “very possible” the portfolio’s target would be upped again within the next two years.

There may be even more to come after that. “I can't say that that's not something that [we would consider],” said interim Chief Investment Officer Dan Bienvenue when asked about an eventual 30 percent private equity allocation.

“I would not rule that out, because I do think again, if you look at the capital market assumptions, private equity is our highest returning asset class, and it's got all those really attractive characteristics.”

Dan Bienvenue on a 30 percent private equity allocation

Calpers also justifies a greater focus on private markets through what it calls its multiplier effect. Their thinking is that, on top of investment returns, Calpers-driven in-state investment contributes an additional $42 billion of economic activity across California.

Their analysis points to the direct effects of increased output, the indirect demand generation from investment recipients, and the induced effects of greater household spending as incomes grow.

The statistics make for pleasant reading, though the actual incremental impact of greater private markets allocations probably doesn’t drive quite as much uplift as the annual Calpers for California report claims.

The reality is that, while Calpers’ commitments do certainly help, many of the California-based deals receiving their capital would still have happened even without their commitment. GPs pursue deals based on their perceived best use of capital, meaning if a California deal is good, they’ll go after it. If not, they won’t. More cash in investors’ hands likely has only a marginal impact on ultimate proceeds received by California-based companies.

Whatever the real logic, a more direct interpretation of the stats makes for better investment committee talking points. Asked if further increases in private markets allocation would drive even greater in-state job creation and economic activity, Interim CIO Bienvenue didn’t hold much back…

Yes, we think that as we lean into private markets that will actually add more activity in California. And that's for two main reasons.

Number one, private markets tend to be smaller companies, and smaller companies tend to be the largest employers of companies in this country. So as we add private assets, we think that we're actually going to add sort of overall employment improvement. And that will be our impact. And of course ours is a small impact. It's a big industry. But as we add private assets, we think that we're generally adding to employment.

Secondly, much of the private assets, specifically private equity, especially in the growth and venture areas and as we diversify that part of the portfolio, much of that is in California, so again, that too would sort of underscore our impact in California.

Investment Committee Open Session, November 13, 2023

The Lost Decade

Perhaps the biggest driver of Calpers’ current private markets excess is their belief that they dropped the ball once before.

Coming out of the financial crisis, Calpers dramatically reduced private equity and venture allocation, fearful of the perceived greater risk profile and illiquidity. Annual commitments from 2009 to 2018 averaged $2.7 billion—for context, 2022’s commitment was $13.6 billion.

An internal analysis presented in September 2022 showed that a decade of underinvestment in alternatives led to what staffers have now dubbed “the Lost Decade.” That decision, they say, drove between $11 - $18 billion of lost value for Californians.

Allocations in recent years have focused on playing catch-up, returning the portfolio’s private markets share to where it should be, and ensuring the same mistake isn’t made again. The pension fund says its long-term goal is to hit private equity commitments of around $15 billion per year.

The Alternatives Strategy

Calpers wants its upcoming capital commitments to further its broad ESG goals, including a proposed 2050 Net Zero Plan focused on tackling portfolio emissions. For investors looking to lock up future funding from Calpers, expect GP environmental reporting and climate risk assessments to be key diligence focus areas.

Alongside its new commitments, Calpers is also looking at opportunities to backfill old vintages (that Lost Decade). The fund is planning to pursue the purchase of secondary stakes across private equity, real estate, credit, and infrastructure.

For future deployment, co-investment is top priority. Currently sitting at 24 percent of private markets activity, Calpers’ investment committee wants to increase its utilization of fee-free, carry-free opportunities to put a damper on compensation paid out to managers. While it’s a strategy that’s not necessarily ideal for investors, Calpers could become a viable option in deals needing a sizeable equity check to get across the finish line.

The Upshot

Calpers is navigating a period of internal uncertainty following the resignation of Chief Investment Officer Nicole Musicco in September, just 18 months into the role. Even so, absent an abrupt change in leadership philosophy, the current private markets emphasis appears to be a high-conviction part of the fund’s overall strategy for the foreseeable future.

For those investors who’ve historically shied away from public pension LPs (thanks to their publication of closely-held fund performance metrics), the prospect of a hefty commitment from Calpers could be changing the calculus in today’s environment.


Adobe has backed out of its planned $20 billion purchase of Figma, developer of a collaborative web app for designers, following prolonged antitrust scrutiny.

Nippon Steel (Tokyo: 5401) agreed to buy U.S. Steel (NYSE: X) for $14.9 billion, a 40 percent premium to last week’s closing price.

DocuSign (Nasdaq: DOCU), trading at a $12.9 billion market value, is considering a sale process, per the WSJ.

Chobani has agreed to acquire La Colombe, a Philadelphia-based beverages brand and coffee shop chain, for $900 million.

Ardian agreed to buy a Peru-based hydropower provider from BTG Pactual.

Audax acquired Dobbs Tire & Auto Centers, a tire retailer to servicing business.

Clearlake Capital and Insight Partners have agreed to acquire data analysis software developer Alteryx (NYSE: AYX) for $4.4 billion.

Polaris Capital Group has agreed to sell pharmacy chain Sogo Medical Group to CVC Capital Partners for $1.2 billion.

Unilever PLC (LSE: ULVR) has agreed to sell global beauty and personal-care brands Q-tips, TIGI, Caress, and Impulse, among others, to Yellow Wood Partners.

Infroneer Holdings Inc. (TSE: 5656) agreed to acquire Japan Wind Development, owned by Bain Capital, for around $1.4 billion.

Samyang Holdings (KRX: 077500) has agreed to acquire Verdant Specialty Solutions, a Houston-based provider of solutions for specialty chemicals owned by OpenGate Capital, for €230 million.

TG Natural Resources has agreed to acquire Rockcliff Energy, an East Texas natural gas operator formed by Quantum Energy Partners, for $2.7 billion.

IBM (NYSE: IBM) has agreed to acquire enterprise technology platforms StreamSets and webMethods from Software AG (DE:SOW), backed by Silver Lake, for €2.13 billion.

Bayview Asset Management is exploring a sale process for Oceanview Holdings, its Coral Gables, Florida-based insurance and reinsurance company.

Callon Petroleum has hired advisors to explore a potential sale after receiving interest from both private equity firms and public E&Ps. It currently trades at a $2.3 billion market value.

Eni (Milan: ENI) is planning to sell a minority stake in Novamont, its bioplastics unit, at around a €1 billion valuation, per Reuters.

Health Care Service Corp. and Elevance Health (NYSE: ELV) are among bidders for Cigna's (NYSE: CI) Medicare Advantage unit, which could be valued at more than more than $3 billion.

Masonite International (NYSE: DOOR) has agreed to acquire PGT Innovations, a rival door and window manufacturer, for $3 billion.

Mitsubishi UFJ Trust & Banking has agreed to acquire Link Group, an Australian pension administration firm, for $1.2 billion.

Shell Plc will sell its 37.5 percent stake in PCK Schwedt, a German oil refinery, to Prax Group.


Golden Goose, a luxury shoe brand owned by Permira, is targeting a €1 billion raise in its upcoming Milan IPO.


Octopus Energy Group has raised an $800 million round at a $7.8 billion valuation, led by Origin Energy, Tokyo Gas, Canada Pension Plan Investment Board, and Generation Investment Management.

Tamara, a Saudi Arabia-based buy now, pay later fintech, raised $340 million in Series C funding at a $1 billion valuation. SNB Capital and Sanabil Investments co-led, with participation from Shorooq Partners, Pinnacle Capital, Impulse, Coatue, Endeavor Catalyst, and

Totus Medicines, a developer of DNA-encoded covalent library technology for small molecule drug discovery, raised $66 million in Series B funding. DCVC Bio led, with participation from North Pond Ventures, Camford Capital, and the University of Minnesota.

Meltwater, a media monitoring and insights company, raised $65 million from Verdane at a $562 million valuation.

Bluestone Equity Partners invested $45 million in VideoVerse, developer of video editing platform Magnifi.

Delphina, a developer of a machine learning platform for data science, raised $7.5 million in seed funding. Costanoa Ventures and Radical Ventures co-led, with participation from Stanford professor Fei-Fei Li.

Vectoflow, an aerospace sensor manufacturer specializing in 3D printed impluse probes, raised €4 million in Series A funding. Bayern Kapital, WN Invest, asto One, argo vantage, and Schwarz Holding all participated.

Spotta, a developer of smart pest detection systems, raised £3 million in new funding. The Yield Lab, STIHL Ventures, ACF Investors, and Growthworks invested, with participation from existing backers Martlet, Wren Capital, Remus Capital, Cambridge Angels, and Cambridge Capital Group.


TorQuest Partners raised $2.1 billion for its sixth middle market buyout fund.

Covalence Investment Partners is targeting $750 million for its debut fund focused on mature oil and gas assets.

Argonaut Private Equity raised $500 million for its fifth middle market industrials fund.

Valiant Asset Management is targeting €300 million for its debut alternative credit fund.


1. Books worth checking out.

• Bloomberg released its annual list of books recommended by leading executives. — Top Business Leaders Pick the Year’s 58 Must-Reads, Bloomberg


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