The California Public Employees’ Retirement System, or CalPERS, is dedicating a multibillion-dollar push into international venture capital in an effort to remedy what it calls “a lost decade.”
The country’s leading public pension fund now expects to grow its allocation from nearly $800 million to $5 billion, the Financial Times reported, heavily increasing its former distribution of just 1% towards venture exposure in a $55 billion private equity program. Over the past year, CalPERS’ private equity portfolio returned -4.7%, while its venture investment performance finished at -24.8%.
In a board meeting presentation set for this month, Anton Orlich, managing investment director at CalPERS, argues that the institutional investor has had an “inconsistent” private equity investment strategy over the past years, describing the inactivity to a “lost decade,” that saw big wins and outperformance in the venture capital market.
Orlich maintains that past allocations to venture strategy contributed to underperformance over the last 10 years, and notes that the fund should “become a preferred solution provider in a period when some LPs [limited partners] are pulling back commitments.” CalPERS had previous disappointing returns in VC—between 2000 and 2020, the large institutional investor saw just 0.49% in venture performance, found a report by PitchBook.
The move now to venture capital allocations might be tricky for CalPERS. The VC space saw a 90% decrease in exit activity last year, according to the National Venture Capital Association. Venture investing also fell 30% compared to 2021’s record high. Lastly, venture capitalists have since incurred losses in 2023, considering recent U.S. bank failures involving Silicon Valley Bank, Signature Bank, and First Republic. CalPERS itself has estimated a loss of $77 million on its investments due to the banking fiasco.
CalPERS currently manages close to $457 billion in assets as of April 2023, serving close to two million members in California on retirement savings needs.
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