CalPERS Eyes More Buyout Fee Cuts, CIO Presses for Wall Street Regulation

(April 27, 2010) — After Apollo Management agreed to a $125 million fee reduction last week, the $213 billion California Public Employees’ Retirement System (CalPERS) is hoping to win more fee cuts from other private equity firms. Apollo, which manages a reported $2 billion of CalPERS assets, agreed to lower fees for CalPERS over the next five years.

CalPERS’ new position on fees illustrates the changing dynamic between fund managers and investors following the economic meltdown: Pension funds and other investors have been able to leverage their size and clout by putting pressure on private equity funds, struggling to raise cash, to slash their fees.

“There’s never been a better time [for investors] to press their case and if we don’t take advantage it’s a missed opportunity,” said CalPERS chief investment officer Joseph Dear at a conference yesterday, according to Alt Alternatives.

In other news regarding the biggest US public pension fund, CalPERS’ Dear said legislation being debated in Congress this week to regulate Wall Street in response to the worst economic crisis since the Great Depression is essential to restore investor confidence in capital markets. “We can’t afford to again go through the crisis we just went through,” he said, according to Bloomberg. “For pension funds and for society, the remedial steps are too huge.”

CalPERS investments lost 23% in the fiscal year that ended in June, dropping $61 billion from September 15, 2008 to January 31, 2009. The fund, which has rebounded to $213 billion from about $180 billion in June, provides benefits to 1.6 million current and retired public workers in California.