Abbott Capital Private Equity leads Q4 distributions at Orange County

  • Why is this important: Abbott Capital represents nearly a quarter of total exposure
  • Performance: Abbott funds produced IRR of 11.5 percent, TVPI of 1.41x

The market value of Orange County Employees Retirement System’s private equity portfolio increased 2.9 percent in Q4, to $1.4 billion from $1.36 billion in Q3.

That’s according to a preliminary performance update by TorreyCove Capital Partners presented at the system’s investment committee meeting on June 27.

In addition, the system’s PE portfolio has generated a since-inception net IRR of 13.3 percent and a TVPI of 1.47X.

Nine active managers oversee 63 active funds, with eight managers representing nearly all the PE portfolio’s exposure, the update shows.

Abbott Capital Management represents the greatest share of the overall portfolio exposure, 24 percent. The firm’s funds have produced a collective IRR of 11.5 percent and TVPI of 1.41x as of the quarter’s end.

Since its inception in 1986, OCERS has committed $2.36 billion to 88 PE investments.

The pension system’s investments are distributed across public equity, private equity, fixed income, credit, real assets, risk mitigation, absolute return, and cash.

The fund’s ending market value for the month of May was $15.76 billion, with PE making up $1.43 billion of that, a preliminary monthly investment report issued at the June meeting shows.

The firm’s actual private equity asset allocation is 9.04 percent of the total fund, while its target allocation is 8 percent.

In Q4, the portfolio made $50 million in contributions, the most significant being $5.3 million for Abbott Capital Private Equity 2009, $4.7 million for Pantheon Multi-Strategy Program 2014, and $4.5 million for Abbott Capital Private Equity 2013.

Significant distributions included $11.6 million from Abbott Capital Private Equity 2009, $9.4 million from Abbott Capital Private Equity 2007, and $8.6 million from Abbott Capital Private Equity 2008.

In the fourth quarter, distributions exceeded contributions with a net cash inflow of $28.4 million.

The pension system did not close on any new PE funds in Q4, although it closed on Pantheon – 2018 Series for $100 million and H.I.G. Advantage for $50 million subsequent to the quarter’s close.

At year-end 2017, the PE program’s performance was 17.4 percent IRR for one year and 14.1 percent IRR for three years, compared with 16 percent and 10.9 percent for the Cambridge Associates Index for private equity and venture funds in North America.

Of the pension system’s 88 PE funds, 35 had generated a TVPI of 1.5x or greater at the end of 2017.

The portfolio is 27 percent buyout, 24 percent venture and growth, 40 percent special situations, and 9 percent other categories.

While special situations constitute a large portion of the portfolio’s current allocation, it will be phased out to bring the buyout and venture and growth allocations more in line with targets, according to the TorreyCove presentation.

Of the 10 most recent vintage years, 2016 has the highest exposure at 19 percent, while the IRR and TVPI for that year are not considered meaningful.

The full TorreyCove presentation and monthly investment report for OCERS are available below.

The next OCERS investment committee meeting is scheduled for July 26, 2018.

OCERS monthly investment report

TorreyCove 4Q17 Private Equity Performance Update – Presentation