FROM: Don Pierce, Chief Investment Officer
SUBJECT: 2025 Private Equity Pacing Plan
RECOMMENDATION:
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Recommend that the Board approve the 2025 Private Equity Pacing Plan.
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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 Allocatio...
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