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The California Public Employees' Retirement System
California Emerging Ventures (CEV) Program Description
CalPERS is one of the world's largest institutional investors, with approximately $140 billion in assets. It is also one of the largest investors in private equity with a 7% target allocation and more than $19 billion of commitments.
In 1998, Grove Street was selected through a competitive process to manage a $350 million discretionary program for CalPERS. GSA's initial mandate was to help CalPERS gain access to the top-tier venture capital firms, most of which were closed to new investors, particularly public pension funds. In addition to the discretionary program, GSA created five large Turn-Key platforms for CalPERS in exceptional new buyout, growth equity and hedge fund opportunities. The initial CEV program was followed in 2000 with the $480 million CEV II program and again in 2001 with the current $500 million CEV III program.
In 2001 GSA's mandate was broadened to cover the full range of private equity, including buyout and other non-venture sectors. Grove Street's current objectives for the CalPERS program focus on building new relationships in areas that complement the existing CalPERS portfolio and managing the reinvestment decisions for the funds backed in the early years of the program.
The CalPERS CEV program has a number of unique features that have been put in place over the life of the program:
Unique Features
- The option for CalPERS to transfer CEV relationships to its core portfolio over time
- The ability for CalPERS to co-invest in funds side-by-side with CEV when there is sufficient allocation available from a fund
- Assistance to CalPERS' staff in building direct relationships with the fund management teams
- Access to GSA's professionals to support and train internal staff, including organizing periodic seminars on industry topics
- Support for CalPERS' staff in providing other due diligence services for transactions that fall outside the CEV charter
Of CalPERS' total commitment to the CEV programs, $1.3 billion is managed at Grove Street's discretion. At the Staff or Board level, CalPERS has already made additional commitments of $1.7 billion in relationships initiated under the CEV program. The program has built a platform of relationships with more than 80 fund managers, including both proven, top-tier teams and many of the most promising new and emerging teams in the industry. A number of the largest relationships are in the process of being transitioned to CalPERS to become key parts of their core portfolio. Most importantly, CalPERS and GSA are now widely recognized in the venture capital community as attractive "investors of choice".
Investment Criteria for the CalPERS CEV Program
- The program targets primarily venture capital and smaller buyout partnerships and considers other private equity investments on a case by case basis.
- It is expected that between 5 and 10 new relationships will be added each year, primarily in North America, Europe and Israel.
- Typical investment size for new relationships:
- $10 to $15 million to proven teams
- $5 to $10 million to new or emerging teams
- Commitments to follow-on funds can scale rapidly when team performance merits
- Turn-Keys - Grove Street and CalPERS opportunistically pursue a lead or sponsoring role in the formation of a limited number of first time funds in which the team member's qualifications are exceptional.
For more information about CalPERS: http://www.calpers.ca.gov/
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