FROM: Don Pierce, Chief Investment Officer
SUBJECT: 2020 Private Equity Pacing Plan
RECOMMENDATION:
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Approve the 2020 Private Equity Pacing Plan.
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BACKGROUND:
The SBCERA Investment Team and NEPC review the Private Equity program annually to ensure the program continues to meet SBCERA’s allocation objectives. For the 2020 calendar year, staff is recommending a PE budget of $600 million. This budget will allow SBCERA to continue deploying capital in private assets at a measured pace while maintaining the Investment Policy target of 16% allocation to the strategy.
The 2020 PE budget includes allocations to a new MCA account, new fund commitment, and a re-up for Crestline Portfolio Financing Fund II. Existing MCA relationships are allocated $245 million in the proposed budget leaving $155 million as dry-powder for future opportunities. Please refer to Exhibit 1 for a breakdown of the allocations.
Exhibit 1: Private Equity Budget and Allocations for 2020
|
Manager |
2019 Allocations |
2020 Allocations |
|
Total PE Budget |
$500 MM |
$600 MM |
|
Adams Street Partners MCA1 |
- |
$50 MM |
|
New Fund Commitment* |
- |
$50 MM |
|
Ares MCA |
$15 MM |
- |
|
Crestline Portfolio Fin. Fund II+ |
- |
$100 MM |
|
Gramercy MCA |
$25 MM |
$25 MM |
|
Industry Ventures MCA |
$100 MM |
$50 MM |
|
Kayne Anderson MCA |
$100 MM |
$50 MM |
|
Partners Group MCA |
- |
$50 MM |
|
Pathway Capital MCA |
$102 MM |
$70 MM |
|
Tennenbaum MCA |
$30 MM |
- |
|
Waterfall MCA |
- |
- |
|
Allocated PE Budget |
$372 MM |
$445 MM |
|
Unallocated PE Budget |
$128 MM |
$155 MM |
1MCA subject to SBCERA Investment Committee and Board approval.
*Quarter 1 potential investment.
+Follow-on fund commitment plus reserve for potential MCA.
Crestline Portfolio Finance Fund II (or “Fund II”):
SBCERA committed $50 million in February 2018 to Crestline Portfolio Finance Fund (or “Fund I”). Fund II will be similar to Fund I from an investment objective, expected returns, and terms perspective. Investor-friendly terms include fees on invested capital and performance fees at the fund level (vs. deal-by-deal basis). The fund’s objective is to provide capital solutions for PE funds that are at least five years old. Expected returns are in the 12%-15% gross of fees return range.
COMMITTEE REVIEW:
This item was reviewed by the Investment Committee at its January 14, 2020 meeting and recommends Board approval, with a 4-0 vote.
BUDGET IMPACT:
Investment Costs are deducted from Net Asset Value.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Amit Thanki
ATTACHMENTS:
Exhibit A: NEPC Private Markets Strategic Investment Plan