The move could potentially minimize the high fees that CalPERS pays to its asset manager for managing its private equity and boost the return of its investments.
According to a source familiar with the matter at hand, Incidentally, California Public Employees’ Retirement System (CalPERS), the largest U.S. pension fund in the U.S is in preliminary talks to outsource its private equity business to BlackRock Inc.
Incidentally, private equity has been CalPERS’ best-performing asset class in the past two decades and accounts for about $26 billion of its portfolio. However, CalPERS is under increasing pressure to provide higher returns; it has come under some criticism for accepting high fees and limited disclosures typically associated with the asset class.
To mitigate these criticisms, the fund had stated in July that it was weighing the option of direct investments in private companies; if it acts on this, it will mark a significant shift in strategy to provide higher returns on its investments, since it will reduce its the high fees.
“No decisions have been made. We are still looking at models to bring back to the board,” said CalPERS’s spokeswoman.
BlackRock declined to comment.