SBCERA set to increase annual PE allocation

SBCERA's private equity consultant NEPC recommends committing approximately $500m to private equity in 2019, with a projected increase in private equity commitments in 2020 to $625m annually, increasing to $650m in 2021. The recommendation will be presented to the fund's board of retirement for approval on 10 January.

$270m of the 2019 budget is forecast to be committed to existing master custodial accounts managed by Ares, Gramercy, Industry Ventures, Kayne Anderson Capital Advisers, Pathway Capital and Tennenbaum, with the remaining $230m yet to be allocated.

During the meeting, the investment committee also recommended a $40m commitment to Aberdeen Standard Secondary Opportunities Fund IV, continuing a relationship with the manager that has seen the LP commit to each generation of the Secondaries Opportunity Funds. This will also be presented for approval at the board of retirement's January meeting.

With $10.3bn in assets under management the pension fund's current investment programme has a long-term strategic target allocation of 16% to private equity with an allowable range of 6%, giving it a maximum allocation of 21%. Its private equity portfolio currently has a net asset value of $1.3bn, which equates to 13.2% of the total plan's assets. An additional $1bn, 10.2% of total assets, is allocated to the asset class, but is yet to be drawn down. This brings SBCERA's total private equity exposure to 23.4%, in line with a policy of being 1.5x overcommitted. Since inception, the portfolio has generated a net IRR of 8.47% and money multiple of 1.49x.

Click here to view a detailed LP profile for SBCERA on Unquote Data, including fund commitments, portfolio-level returns and co-investment activity

The allocation of the pension fund will continue to be biased towards strategies with stronger early distribution characteristics. The $500m target will allow SBCERA to maintain target exposure while investing in private assets across all the sub-strategies, including distressed debt, direct lending, mezzanine debt, buyouts, growth equity and venture capital.

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