Tuesday, June 13, 2023

CalPERS Musicco Knows PEU

Almost Daily Grant's

The California Public Employees’ Retirement System (Calpers) detailed plans to ramp up its venture capital portfolio allocation Friday, as the pension behemoth looks to atone for a “lost decade” of under-investment in private assets, a decision which cost the fund as much as $18 billion in foregone returns over the ten years through 2018 per newly installed chief investment officer Nicole Musicco.  Calpers intends to pour as much as $5 billion into the asset class, more than five times its current foothold and a sum sufficient to become one of the largest venture investors in the U.S.

Prior to joining CalPERS CIO Musicco served as partner with RedBird Capital Partners, "an investment firm focused on building high growth companies, in partnership with entrepreneurs and families."

Musicco headed up private equity investments for an Ontario pension fund prior to joining RedBird. 

CalPERS knows private equity from its limited partner stake in The Carlyle Group, a politically connected private equity underwriter (PEU).  Flashback to May 2001:

With a newfound aggressiveness, CalPERS is investing in hedge funds, buying stakes in private equity firms and loading up on junk bonds.

Two months ago CalPERS, which has in the past five years more than doubled its commitment to private equity, picked up ownership stakes in two private equity firms - a first for any public fund. CalPERS paid $175 million for a 5 percent interest in the Carlyle Group, the high-profile fund whose partners and consultants include former president George Bush and former Defense secretary Frank Carlucci, and it paid $60 million for a stake in a venture capital subsidiary of Texas Pacific Group. CalPERS now ranks as the nation's single largest private equity investor, having eclipsed the Washington and Oregon state plans, which had dominated the field.
CalPERS knew PEUs from the inside.  That may or may not explain avoiding big PEU bets after the 2008 financial crisis.  

Their new CIO knows PEUs too and she's ready to load up in the riskier side of the business.  Will that include RedBird's new joint venture with former CNN CEO Jeff Zucker?  Time may tell.

Update 9-15-23:  Musicco will step down as CalPERS CIO at the end of September.  She lasted 18  months in the role. Stay tuned for Musicco's next PEU role.