California Public Employees Retirement System is
reportedly talking with BlackRock about outsourcing the pension
giants buyout business.
CalPERS, the largest pension fund in the U.S., may ask
BlackRock to manage all or part of its private-equity holdings,
as it seeks to control fees, according to a September 7 Bloomberg report that cited people
familiar with the matter. CalPERS and BlackRock, the
worlds largest asset manager with $5.7 trillion of
assets, declined to comment on a potential agreement.
CalPERS in April began reviewing how it invests in private
equity, looking to cut exposure to the asset class because of
rising fees. Asset allocators such as pensions and endowments
are becoming increasingly concerned about fee transparency
and the costs associated with alternative fund
No decisions have been made and we are still looking
at models to bring back to the board, John Osborn, a
spokesman for CalPERS spokesman, said in an email.
The California pension fund has about $26 billion in
private-equity assets that BlackRock could help manage if the
preliminary talks lead to an outsourcing arrangement. New
York-based BlackRocks latest private-equity fund,
BlackRock Private Opportunities III, closed last year with $630
million of capital, according to Palico, which provides an online
marketplace for private-equity firms.
[II Deep Dive: CalPERS Review How It Invests in Private
CalPERS, which has $295 billion of assets under management,
allocates 8.9 percent of its portfolio to private-equity
strategies, according to its website.
The pension fund reported in July that its private-equity
portfolio produced 13.9 percent returns for the fiscal year
ended June 30, compared with a 19.7 percent gain for its
investments in public equities.
With record levels of capital flowing into private markets
this year, fund managers are charging investors higher fees,
according to a Preqin report in July.
Management fees for buyout funds, for example, have risen
over the last two vintage years to 1.94 percent on average,
from 1.85 percent in 2015, the alternative-assets data provider