Though CalPERS has acknowledged private equity’s problems, including high fees and murky disclosure, its record of generating higher returns over time than it does in public stocks has made it an indispensable part of the portfolio, officials said.

Dean Starkman Dean Starkman
November 16, 2015

The nation’s largest public pension fund would have endured lower returns and higher volatility over the years had it not invested in private equity, even with its high fees and added risks, experts testified Monday.

At a daylong workshop before the investment committee of the California Public Employees’ Retirement System, officials and outside experts described an investment landscape in which the private equity industry still retains the upper hand over investors desperate for the sector’s higher-than-average returns.

“There is an enormous amount of demand for what we call the better performing manager,” said Réal Desrochers, a director of CalPERS’ $28-billion private equity program. “There is intense competition to get” into the top performing funds.

The informational workshop comes during a time of heightened public scrutiny of private equity, the often risky business of buying and selling whole companies through leveraged buyouts, venture capital investments and other direct investments.

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