May 4 Blackstone Group LP, the world's
largest alternative asset manager, is close to securing a major
managed account on behalf of CalPERS, one of private equity's
largest investors, a source familiar with the matter said on
In an increasingly competitive fundraising environment,
diversified private equity firms have been capitalizing on their
scale by offering large pension funds the opportunity to invest
in special accounts across their investment funds.
This boosts the assets under management of firms such as
Blackstone, which have moved beyond buyouts into areas such as
credit, hedge funds and real estate. In exchange for their major
commitments, the investors get a break on management fees.
An agreement between CalPERS and Blackstone could be reached
as early as next week, the source said, without elaborating on
the size of the deal or its details. The source was not
authorized to speak publicly about the issue and asked not to be
Spokespeople for Blackstone and CalPERS declined to comment.
The CalPERS commitment would represent a coup for Blackstone
after the New Jersey Division of Investment(NJDOI), which
manages a $66.2 billion pension fund, agreed last December to
invest $1.8 billion across Blackstone's investment businesses,
bringing its total commitment to $2.5 billion.
Blackstone rivals KKR & Co LP and Apollo Global
Management LLC had raised the "mega-mandate" stakes a
month before by announcing they would manage $3 billion each on
behalf of the Teacher Retirement System of Texas.
Private equity firms typically charge around 1.5 percent of
committed capital as a management fee but investors may pay
different fees based on the size of their commitments.
"Mega-mandates" allow investors to pay lower fees for big
Some 1,853 private equity targeting a total of $787 billion
were fundraising as of the start of the second quarter, a 19
percent year-on-year rise in the aggregate capital sought,
according to market research firm Preqin.
Blackstone, whose investments include The Weather Channel,
Pinnacle Foods and SeaWorld Parks & Entertainment, has seen its
assets under management swell to a record $190 billion as of the
end of March.
Its latest buyout fund, Blackstone Capital Partners VI, has
raised over $16 billion; its flagship real estate fund,
Blackstone Real Estate Partners VII, has raised about $10
billion while its new energy fund has accumulated about $1.5
billion in committed capital.
CalPERS, the California pension fund for public employees,
had invested $825,972 million in Blackstone shares and a total
$771 million in several of its funds as of the end of June 2011,
according to the latest data available on its website.
Fortune's Dan Primack reported on the deal between
Blackstone and CalPERS earlier on Friday.