The California Public Employees' Retirement System, known as CalPERS, is considering changing the benchmark it uses to measure its Private Equity performance, according to the Private Equity Annual Program Review dated December 15, 2004 and media reports. According to the report (page 10), the current benchmark for the private equity program is based on a combination of certain public stock indices plus 300 basis points, lagged by one quarter. The report recommends that the benchmark should be reviewed as the current benchmark "creates unintended active risk" for the private equity program as well as for the total pension fund. This report is really interesting, and I recommend that you download it and peruse it.
The report (on page 16) finds that their private equity performance has under-performed against the current PE policy benchmark over the 1, 3, 5 and 10 year periods. It also finds that their PE performance has under-performed CalPERS' global equity performance in the last 1 year by 4.8%, but out-performed the global equity performance over the last 3, 5, 10 and 20 year periods: 1.5% over 3 years, 3.0% over 5 years; 5.7% over 10 years and 3.0% over 20 years. The report also indicates that CalPERS has also an internal asset liability management assumption that the PE program will perform at 9% per year.
I'm always interested in the performance benchmarks used by private equity investors. As every program is unique, I have found that the benchmarks used are as varied as the programs themselves. If you're an LP investing in private equity, I'd be very interested to know what benchmark(s) you use to evaluate your private equity program's performance - please comment to this post or contact me through the About/Contact page.
Link to the CalPERS' Private Equity Annual Program Review:
http://www.calpers.ca.gov/eip-docs/about/committee-meetings/agendas/invest/201412/item09c-01.pdf
The report (on page 16) finds that their private equity performance has under-performed against the current PE policy benchmark over the 1, 3, 5 and 10 year periods. It also finds that their PE performance has under-performed CalPERS' global equity performance in the last 1 year by 4.8%, but out-performed the global equity performance over the last 3, 5, 10 and 20 year periods: 1.5% over 3 years, 3.0% over 5 years; 5.7% over 10 years and 3.0% over 20 years. The report also indicates that CalPERS has also an internal asset liability management assumption that the PE program will perform at 9% per year.
I'm always interested in the performance benchmarks used by private equity investors. As every program is unique, I have found that the benchmarks used are as varied as the programs themselves. If you're an LP investing in private equity, I'd be very interested to know what benchmark(s) you use to evaluate your private equity program's performance - please comment to this post or contact me through the About/Contact page.
Link to the CalPERS' Private Equity Annual Program Review:
http://www.calpers.ca.gov/eip-docs/about/committee-meetings/agendas/invest/201412/item09c-01.pdf
