The California Public Employees’ Retirement System (CalPERS) has entered into global infrastructure strategic partnership with UBS Global Asset Management worth $500 million.
The $300 billion public pension plan said it would contribute $485 million to the newly formed partnership—operating as Golden State Matterhorn, LLC—while UBS would add $15 million as a managing member.
“UBS brings extensive experience and a proven track record in global infrastructure investing that makes them a great fit for this partnership,” said Ted Eliopoulos, CalPERS’ interim CIO. “We’re excited to work with them as we identify and acquire core assets that will provide the best risk-adjusted returns for our portfolio.”
Golden State Matterhorn will pursue investment opportunities in infrastructure across core and OECD markets, UBS said, utilizing the services of its infrastructure and private equity unit that already manages direct investments globally.
“We share a common view of good infrastructure investment and the value-add and risk management activities associated with these investments,” said Paul Moy, UBS’ global head of infrastructure and private equity business.
“We’re excited to work with [UBS] as we identify and acquire core assets that will provide the best risk-adjusted returns for our portfolio,” said Ted Eliopoulos, CalPERS’ interim CIO.
UBS announced Golden State Matterhorn was officially established on June 30, 2014 and is “actively considering” opportunities to make two to four investments over the next few years.
CalPERS currently holds $1.8 billion in infrastructure assets, primarily in transportation, power, energy, and water sectors in both public and private investments, the pension plan said.
During the fiscal year ending June 30, 2014, CalPERS returned 22.8% in infrastructure investments, outperforming the 17.23% benchmark. Over the past five years, it saw a 23.3% return, well over its16.6% benchmark.
CalPERS and UBS’ partnership is one of numerous arrangements made between large public pension funds and asset management firms seeking attractive investment opportunities—and getting a good deal on fees.
Teacher Retirement System of Texas, run by CIO Britt Harris, took a $250 million stake in Bridgewater Associates in 2012 and New Jersey’s pension fund, led by then-CIO Tim Walsh, also committed to a $1.8 billion partnership with Blackstone in 2011.
“We call it strategic relationship, not partnership,” Walsh told CIO in 2012. “We use the relationship as an extension of our staff. There is only so much we can do with limited resources and manpower.”
CalPERS had also entered into a multiclass partnership program with AlphaSimplex Group, AQR Capital Management, PIMCO, and Standard Life Investments in 2011, allowing the pension plan to allocate up to 3% of the total fund into the relationships with the four external managers.
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