Fee avoidance

CalPERS' latest private equity strategy


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

  • A look at CalPERS’ latest private equity strategy

  • Plus, Permira pulls Golden Goose IPO at the last minute


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CalPERS’ latest private equity strategy:

In a board meeting on Monday, California Public Employees' Retirement System (CalPERS), the $483 billion pension fund, approved a proposal to increase its target private equity allocation from 13 percent to 17 percent and outlined its updated strategy for the asset class.

The increase continues CalPERS's heavy focus on private markets following the fund’s ‘lost decade,’ the period between 2009 and 2018 in which CalPERS retreated from private equity just as the asset class exploded.

This week’s shift will boost CalPERS' total private markets exposure to 40 percent of assets under management, up from the current 33 percent. To accommodate the increase, the fund will pare back its public equity target allocation from 42 to 37 percent and fixed income from 30 to 28 percent.

"We have been transferring more equity risk from the public markets to the private markets, although public equity remains the largest portion of our portfolio. Buyout remains the largest portion of the private equity portfolio by far, at approximately 67 percent," said Anton Orlich, managing investment director for CalPERS’ private equity group.

Buyout’s dominance, however, is waning. CalPERS has been gradually shifting commitments toward alternative strategies like venture and growth, believing that earlier-stage options may allow for more differentiation.

CalPERS commitments by type

CalPERS Private Equity Annual Program Review

In fiscal year 2021, the fund committed 91 percent of its private equity dollars to buyout strategies. Year-to-date, that figure has dropped to just 60 percent.

Their rationale, according to Orlich: “This will provide a more diversified portfolio and give CalPERS the opportunity to generate alpha by participating in segments of the private equity space that have greater return dispersion. As a result, manager selection will have a greater impact.”

CalPERS is also planning to shake up its approach within buyout’s remaining allocation. Going forward, the pension fund sees the most opportunity in the middle market and has adjusted its manager selection accordingly. Through Q1 of this year, commitments to middle market funds outpaced those to the previously dominant larger end of the market for the first time.

Part of the motivation for this shift is a desire for greater exposure to sector specialists. Defined as managers with either a specific thematic or industry focus, the fund cited an “operational know-how which will provide a source of alpha.”

The final significant strategic goal from CalPERS’ update this week is a heavy focus on its co-investment activities, which it sees as the best way to boost returns thanks to the avoidance of management fees and carried interest paid to fund managers.

Illustrative co-invest scenario

CalPERS Private Equity Annual Program Review

Board materials shared at the meeting included an illustrative scenario showing estimated savings of $400 million for every $1 billion committed to direct co-investment instead of traditional fund investments.

According to Orlich, potential savings could reach $25 billion over a 10-year period based on CalPERS’ target co-invest ratio of 40 percent.


KKR, TPG, and Advent International are among private equity firms that have expressed initial interest in acquiring all or part of CVC Capital Partners' 51.8 percent controlling stake in Recordati, an Italian pharmaceutical company, which has a current market value of around €10 billion, per Bloomberg.

Ardian and Saudi Arabia's PIF agreed to acquire stakes in London's Heathrow Airport from Ferrovial and other shareholders for £3.26 billion.

Boston Scientific (NYSE: BSX) agreed to acquire Silk Road Medical (Nasdaq: SILK), a developer of devices for minimally invasive carotid artery procedures, for around $1.26 billion.

KKR and Singtel invested around $1.3 billion into ST Telemedia Global Data Centres, a Singapore-based data center colocation services provider.

Banco de Sabadell has postponed the €350 million sale of its Paycomet retailers' payments business to Nexi after becoming the target of a €12.28 billion hostile takeover bid by BBVA, per Reuters.

Shell (NYSE: SHEL) agreed to acquire Pavilion Energy, a Singapore-based liquefied natural gas trader, from Temasek.

Shift4 (NYSE: FOUR) acquired a majority stake in Vectron Systems, a Germany-based supplier of point-of-sale systems.

Mozilla acquired Anonym, a provider of privacy-preserving digital advertising solutions, with backing from Griffin Gaming Partners, Norwest Venture Partners, and Heracles Capital.

Great Day Improvements, a portfolio company of Littlejohn & Co., acquired ELM Home & Building Solutions, a DTC home-remodeling company, from Audax Private Equity.

Transtar, a portfolio company of Blue Point Capital Partners, acquired PPi Automotive, an automotive parts wholesale distributor.

Impact Property Solutions, a portfolio company of Blue Sage Capital, acquired OneSource Flooring and Interiors, a provider of flooring products and installation services to multifamily and commercial properties in Arizona.

Hillhouse Investment is in talks to acquire Dulwich College International, a network of international schools, after Blackstone's attempt to buy a portion of the business' Singapore and South Korea assets fell apart.

Thermal Technology Distribution Solutions, a portfolio company of Gryphon Investors, acquired Thermal Devices, a distributor of industrial electric heaters.


Golden Goose, the Permira-backed luxury sneaker maker, postponed its planned initial public offering at the last minute due to concerns over the potential for a lukewarm market reception.


Tech, Vertical SaaS, & Misc. Enterprise

Waabi, a self-driving trucking startup, raised $200 million in Series B funding co-led by Uber and Khosla Ventures, with participation from Nvidia, Volvo, Porsche, Scania Invest, Ingka Investments, HarbourVest, G2 Venture Partners, BDC Capital, Export Development Canada, Radical Ventures, and Incharge Capital.

Huntress, a cybersecurity startup focused on SMEs, raised $150 million in Series D funding at a $1.55 billion valuation co-led by Kleiner Perkins and Meritech Capital, with participation from existing investor Sapphire Ventures.

SurrealDB, a multi-model database startup, raised $20 million in Series A funding co-led by FirstMark and Georgian, with participation from Crew Capital and Alumni Ventures.

SewerAI, a sewer inspection and assessment platform, raised $15 million in Series B funding led by Innovius Capital, with participation from Emerald VC, Epic Ventures, Suffolk Technologies, Bentley Systems, and Burnt Island Ventures.

Auxilius, a clinical trial financial management platform, raised $10 million in Series A1 funding led by SignalFire, with participation from XYZ Venture Capital, Renegade Partners, CP Overture, and Bain Capital Ventures.


FINBOURNE Technology, a London-based financial data management startup, raised £55 million in Series B funding co-led by Highland Europe and AXA Venture Partners.

Consumer & Media

THIS, a plant-based meat alternatives brand, raised £20 million in Series C funding led by Planet First Partners.

Stanly, a Los Angeles-based platform connecting fans with their favorite fandoms, raised $8 million in pre-Series A funding led by C Capital, with participation from AppWorks, Goodwater, and Palm Drive Capital.


Marea Therapeutics, a South San Francisco-based clinical-stage biotech targeting cardiometabolic diseases, raised $190 million in combined Series A and B funding from Third Rock Ventures, Sofinnova Investments, Forbion, Perceptive Xontogeny Venture Fund, venBio, Alpha Wave Global, Omega Funds, and Surveyor Capital.

Talkiatry, a NYC-based provider of in-network psychiatric care, raised $130 million in Series C funding led by Andreessen Horowitz, with participation from Perceptive Advisors.

Nomad Health, a digital marketplace for temporary healthcare jobs, raised $22 million in new funding from Adams Street Partners, Icon Ventures, HealthQuest Capital, Polaris Partners, .406 Ventures, AlleyCorp, RRE Ventures, JPMorgan, and Trinity Capital.

Marigold Health, a provider of peer support services for substance use disorder care, raised $11 million in Series A funding co-led by Rock Health and Innospark Ventures, with participation from Commonwealth Care Alliance, Wavemaker360, Stand Together Ventures Lab, Epsilon Health Investors, Koa Labs, VNS Health Plan and KdT Ventures, per Axios.

Industrials, Greentech, & Other

CuspAI, an AI-powered platform for next-generation materials, raised $30 million in seed funding led by Hoxton Ventures, with participation from Basis Set Ventures and Lightspeed Venture Partners.

Princeton NuEnergy, a lithium-ion battery recycling startup, raised $30 million in Series A funding led by Samsung and Helium-3 Ventures, with participation from Honda Motor Co., LKQ Corporation, SCG Group, Traxys Group, and Wistron Corporation.

Bitsensing, a South Korean advanced radar startup, raised $25 million in Series B funding led by the Korea Development Bank and HL Mando Corp., with participation from Industrial Bank of Korea, Aju Capital, Life Asset Management, and SCL Investment.


Hamilton Lane raised $5.6 billion for its sixth secondaries fund.

Kinderhook Industries raised $2.75 billion for its eighth flagship buyout fund.

Paradigm raised $850 million for its third crypto-focused venture fund.

The Engine Ventures raised nearly $400 million for its third deep tech venture fund.

Kfund raised €70 million for its sixth fund focused on early-stage Southern European startups.


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