Canyon to run CalPERS’ emerging RE manager programme

The $238 billion pension system and the real estate investing arm of Canyon Partners will seek up to six managers with no more than three prior commingled funds to mentor.

The California Public Employees’ Retirement System (CalPERS) has selected Los Angeles-based investment and advisory firm Canyon Capital Realty Advisors to run its new $200 million emerging manager programme for real estate.

According to a statement, CalPERS and the real estate direct investing arm of Canyon Partners, through its new Canyon Catalyst Fund, will seek up to six managers with less than $1 billion in assets under management and no more than three prior commingled funds or separate account investment vehicles. The programme will focus on managers and assets in urban California markets. Once the emerging managers are selected, Canyon will mentor them through the fundraising process.

“Canyon’s extensive experience and proven track record in urban investing makes them a great fit to lead this programme,” said Ted Eliopoulos, senior investment officer of CalPERS’ real estate programme. 

CalPERS chief investment officer Joe Dear added that, although “achieving appropriate risk-adjusted earnings must always be” the $238 billion state pension system’s primary objective, he hopes the “programme will lead us to new investment opportunities in California and increase diversity among our pool of real estate investment managers.”

Approved by the CalPERS Board of Administration in August 2011, the programme will run for five years, and CalPERS staff will provide an annual progress report to its investment committee. Upon completion of the programme, staff will evaluate the outcome and consider the feasibility of a second phase.

CalPERS is following in the footsteps of other state pension plans that have adopted programmes for emerging real estate managers. In particular, it is similar to the programmes implemented by both the Employees Retirement System and Teacher Retirement System of Texas. 

Over the last three years, CalPERS has committed approximately $1 billion to emerging manager strategies in the areas of private equity, global equity, hedge funds and real estate, including the fund to be managed by Canyon Capital. Currently, the pension system has $9.7 billion invested with more than 300 emerging managers, representing more than 11 percent of its externally managed capital.