FROM: Don Pierce, Chief Investment Officer
SUBJECT: 2025 Private Equity Pacing Plan
RECOMMENDATION:
title
Recommend that the Board approve the 2025 Private Equity Pacing Plan.
body
BACKGROUND:
The annual pacing plan exercise is a market standard approach adopted by institutional investors to achieve better allocation results from private market investments. The exercise serves three main purposes:
1. Identify a specific dollar target that can be deployed into private markets like private equity and real estate.
2. Provide for a consistent and calculated deployment pace.
3. Prevent unintended consequences of over allocation or forced selling due to liquidity constraints.
SBCERA Budget Update & Highlights
SBCERA’s target to Private Equity (“PE”) is 18% and represents 19.3% allocation based on a market value of $15.38 billion, a slight overweight to the target weight. For the 2025 calendar year, NEPC has identified a PE deployment budget of $625 million to ensure allocation target is maintained. The 2025 PE budget is 13% greater than 2024 and is largely due to the growth in SBCERA AUM, conservative deployment of prior year budgets, and distributions during the year. For 2025, SBCERA’s MCA relationships will receive 38% or $250 million of the budget with the balance available as dry-powder for new opportunities. A breakdown of the PE Pacing Plan is provided in Table 1 below.
Since 2020, the private equity program budget has averaged $600 million with an average yearly commitment of $384.6 million to PE opportunities. During the same period, SBCERA has received an average monthly distribution of $29.3 million including $189 million YTD 2024. Since inception in 2004, SBCERA’s PE allocation has generated a net 10.67% IRR and 1.64x multiple on $4.6 billion of commitments as of Q4 2023. Performance at the underlying MCA relationships is provided in Table 2 below.
Table 1: Private Equity Budget and Allocations for 2023-2025
|
Manager Allocations |
2023 |
2024 |
2025 |
|
Total PE Budget |
$525 MM |
$575 MM |
$650 MM |
|
|
|
|
|
|
Adams Street Partners MCA |
$75 MM |
$75 MM |
$75 MM |
|
Industry Ventures MCA |
$100 MM |
$50 MM |
$50 MM |
|
Irradiant Partners MCA |
$50 MM |
- |
- |
|
Kayne Anderson MCA |
$25 MM |
- |
- |
|
Partners Group MCA |
$75 MM |
$75 MM |
$50 MM |
|
Pathway Capital MCA |
$85.4 MM |
$100 MM |
$75 MM |
|
Patria SOF V |
- |
$75 MM |
- |
|
Allocated PE Budget |
$410.4 MM |
$375 MM |
$250 MM |
|
Unallocated PE Budget |
$114.6 MM |
$200 MM |
$400 MM |
Table 2: SBCERA MCA Net Performance as of 06/30/2024:
|
|
Since Inception (net) |
|
|
Manager |
IRR |
Multiple |
DPI |
NAV ($ Million) |
|
Adams Street Partners MCA Fund 1 Inception: 9/2020 |
11.4% |
1.25 |
0.14 |
$156.85 |
|
Adams Street Partners MCA Fund 2 Inception: 9/2023 |
NM |
1.19 |
0.01 |
$36.52 |
|
Ares MCA Inception: 1/2014 |
8.7% |
2.70 |
0.63 |
$749.03 |
|
Industry Ventures MCA Inception: 9/2013 |
17.7% |
1.80 |
0.59 |
$516.91 |
|
Kayne Anderson MCA Inception: 9/2017 |
12.2% |
1.31 |
0.77 |
$397.47 |
|
Partners Group MCA Inception: 6/2013 |
12.1% |
1.48 |
0.48 |
$732.30 |
|
Pathway Capital MCA Inception: 3/2014 |
19.3% |
1.7 |
0.70 |
$685.50 |
|
Waterfall MCA Inception:11/2018 |
16.47% |
1.71 |
1.26 |
$70.13 |
BUDGET IMPACT:
Investment Costs are deducted from Net Asset Value.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Amit Thanki
ATTACHMENTS:
Exhibit A: YTD 2024 Private Equity MCA Deal Flow
Exhibit B: Historical Private Equity Budget Allocation
Exhibit C: NEPC 2025 Private Equity Pacing Plan