CalPERS’ alternatives SIO has responsibilities reinstated

The newly appointed senior investment officer of the alternative investments management program at CalPERS, Real Desrochers, will have authority and management delegation reinstated after it was withdrawn when the former SIO resigned amid a fraud lawsuit.

Chief investment officer, Joe Dear, took on the responsibilities of the AIM after Leon Shahinian – who headed the private-equity portfolio – resigned amid a fraud lawsuit. Shahinian was put on administrative leave in May last year.

Desrochers, who formerly oversaw the private equity program of CalSTRS and before that worked at Caisse de Depot Quebec, will be responsible for managing the globally diversified portfolio of private equity investments, worth about $49 billion of committed capital. About $33 billion is currently invested.

Desrochers has also worked as the chief investment officer of the Saudi Arabian Investment Company.

He will report to Dear, who has been responsible for the AIM program since Shahinian’s departure last year.

The fraud lawsuit – which centred on the activities of CalPERS’ board member and placement agent, Alfred Villalobos, his company ARVCO Capital, and former CalPERS chief executive, Federico Buenrostro – was instrumental in CalPERS putting in place protocols which required external investment managers to disclose fees and other information about the placement agents they hired to seek business from the fund.

In February last year, before the staff upheaval in the AIM team, Shahinian had outlined his priorities for the program which included developing a co-investment policy framework and plan, and pushing for better terms and conditions in partnership agreements.

It will also emphasise contrarian or opportunistic investments, buying good assets from distressed sellers.

Some of the challenges outlined in this presentation to the board included avoiding becoming a private equity index as the program grows, its heavy weighting in large/mega buyouts, limited ability to rebalance due to the depressed secondary market conditions, its resources nearing capacity and how to take the special programs to the next level.