The California Public Employees Retirement System is partnering with GCM Grosvenor and TPG to invest in young, diverse, and emerging private market investors.
Through Grosvenor’s Elevate strategy, CalPERS will commit $500 million for seed investments in small, emerging, and diverse private equity firms to help fund and scale their growth.
“This capital addresses an important market opportunity and will ensure talented investors have the ability to launch their own firms and deliver for their clients,” stated Michael Sacks, chairman and CEO of GCM Grosvenor Elevate, in a press release.
An additional $500 million will be committed to the TPG Next Fund to identify and support the “next generation” of private market investors in getting better access to capital, resources, and strategy expertise.
The Next Fund will focus on women, ethnic minorities, the LGBT community, and military veterans, which TPG sees as the fastest-growing undercapitalized groups in the U.S.
“Our hope is that Next can help these diverse managers and the diverse communities that they’re connected to access more capital and bring our industry in line with demographic trends,” Pamela Pavkov, partner and head of TPG NEXT, told Institutional Investor. “We’re foremost focused on identifying investors who have a comparative advantage with respect to sourcing new opportunities, executing investments, and building successful businesses, both at the GP level as well as the portfolio company level.”
CalPERS recently upped its allocation to private investments, which the pension fund views as “an important component of achieving the returns needed to fulfill the retirement promises made to more than 2 million members,“ according to the release. Allocations to private equity — which CalPERS highlighted as the highest performing asset class in its portfolio — were increased from 8 to 13 percent for the 2022-2023 fiscal year.
“CalPERS is committed to giving access and opportunity to new and innovative talent in the investment industry,” CalPERS chief investment officer Nicole Musicco said in the release. “We want to create and nurture an ecosystem that will serve as a catalyst to seed the next generation of diverse talent and foster different ways of seeing and solving problems.”
Citing research from the National Association of Investment Companies, the pension fund noted that diverse private equity managers consistently outperformed their peers, with higher net internal rate of returns than the Burgiss Median Quartile in 83 percent of the vintage years analyzed between 1998 and 2020.
Last year, CalPERS hosted its second Pathways for Women Conference in California, where three of the pension fund’s female leaders implored money managers to appoint more women to executive positions. The CalPERS executives included Musicco, CEO Marcie Frost, and board president Theresa Taylor.
