CalPERS sells $3bn fund interests to Blackstone’s Strategic Partners

The California Public Employees’ Retirement System (CalPERS) has sold $3bn (€2.79bn) in real estate fund interests, marking the largest secondary market transaction in the asset class.

Blackstone’s Strategic Partners Fund Solutions group has agreed to buy the interests in 43 real estate funds, which CalPERS announced it would be selling in the summer.

As part of a systematic effort to simplify its investment portfolio and lower costs, CalPERS has been reducing the number of relationships with property and private equity managers.

In June, CalPERs said it planned to reduce the number of external asset managers it used by about half, from about 200 to about 100. The sale of fund interests was one of the first moves taken under the new plan.

The transaction comprises interests in 43 international and domestic funds, and represents about 10% of CalPERS’ property assets, according to the fund.

Property assets currently total $27.1bn, less than 10% of the fund’s $293bn total, across industrial, residential and commercial assets.

CalPERS began to transition its property holdings into more conservative core investments in 2007 under the leadership of CIO Ted Eliopoulos, who was then head of real estate.

Paul Mouchakkaa, managing investment director for real assets at CalPERS, said: “This sale allows CalPERS to focus on our strategic plan and on investing in assets and managers that better align with our real estate goals.

“It also represents the continued effort to reduce complexity across the CalPERS fund.”

Mark Burton, head of real estate at Strategic Partners, described it as “a marquee transaction for the real estate secondaries industry”.

It is understood that Blackstone expects the real estate fund secondary market – which is still less liquid than its private equity counterpart – to double in the coming years.

Burton was hired last year with this mind, joining Strategic Partners, a specialist in the secondary market in private equity and other private markets bought by Blackstone from Credit Suisse in 2013.

The unit had $17.3bn in committed capital at the end of September, with $4.2bn available to invest, according to Blackstone’s third-quarter results statement.

It was not clear whether the transaction with CalPERS would be funded from that $4.2bn.

CalPERS was advised by Park Hill Group, which was spun out of Blackstone earlier this year to become part of publicly-listed financial advisory firm PJT Partners.