Calpers cuts ties with Pacific Corporate Group in fund overhaul

The California Public Employees’ Retirement System, the biggest U.S. public pension fund, said it’s severing ties with Pacific Corporate Group as it revamps its private-equity program.

Pacific Corporate Group will no longer help manage two emerging-markets funds with more than $1 billion combined or run the pension system’s Clean Energy & Technology Fund, Calpers said Monday.

Chief Investment Officer Joseph Dear is overhauling Calpers’s private-equity strategy after the system was caught up in the scandal involving payments to placement agents, third parties who help money managers find business.

“This new relationship and the repositioning of the assets with the new independent teams is part of the systematic restructuring of our private-equity program to reposition our assets and focus on improved performance, accountability and transparency with our partners,” Dear said in the statement.

Aviva Capital, part of a joint venture with Pacific Corporate Group for the emerging-markets funds, will continue working with Calpers, according to the statement. Capital Dynamics, based in Switzerland, will take over management of the clean-energy fund.

Pacific Corporate Group, based in La Jolla, was the first pension-fund adviser to settle with New York Atty. Gen. Andrew Cuomo as part of his investigation of “pay to play” claims involving that state, agreeing in 2009 to return more than $2 million and abide by a new code of conduct.

“Pacific Corporate Group has had the successful opportunity to serve Calpers as a fiduciary for over 20 years,” the firm said. PCG generated a net internal rate of return “in excess of 23% while producing over $3 billion in investment gains to enhance the retirement security of Calpers beneficiaries,” the firm said.

Brad Pacheco, a spokesman for Calpers, declined to comment beyond the pension system’s statement.

In May, the California attorney general’s office sued Alfred Villalobos, a Calpers board member from 1993 to 1995 who became a placement agent, accusing him of trying to improperly influence Calpers personnel to favor Apollo Global Management and other private-equity clients. On Aug. 26, Leon Shahinian, head of Calpers’ private-equity team, resigned after the state alleged he accepted a private jet flight, a $200 bottle of champagne and other gifts from Villalobos in May 2007.

Calpers oversees about $216 billion in assets, including about $28 billion in its alternative-investment management program. That program returned 31% for the 12 months ended in March 31, Calpers said.