Arkansas Teacher Retirement System plans to keep its 12 percent allocation target to private equity while looking to make more commitments next year.
This year, the system committed $300 million to private equity. Based on the recommendation of Franklin Park, ATRS’ consultant, the system needs to increase its annual commitments to $350 million to maintain its allocation pace.
The plan for 2022 is to commit the $350 million to 11 funds/vehicles. As of June 30, 2021, the portfolio is above target at 13.5 percent. According to pacing plans presented at the investment committee meeting December 6, the pace will slowly decrease, getting back to 12 percent in June 2026.
The system’s 1996-2000 legacy portfolio is almost fully liquidated, generating a 1.4x multiple and 9.2 percent net IRR, and the post-2000 portfolio is producing a 1.9x multiple and 18.1 percent net IRR.
“For the post 2000-portfolio, year-end 2020 it had a net IRR of 16.5 percent and year before that it was 15.4 percent, so good increases in performance over the last couple of years in this portfolio as it continues to mature,” said Michael Bacine, managing director and co-founder at Franklin Park.
The portfolio as a whole was generating an 11.7 percent net IRR.
As far as the ATRS performance by strategy as of June 30, 2021, buyouts were generating a 1.7x multiple and a net IRR of 11.7 percent. Venture capital is the portfolio’s best preforming strategy, with a 3.6x multiple and net IRR of 27.6 percent.
2021 was also a “stellar” year for distributions, according to Bacine.
“The year saw almost $600 million of distributions and $180 million of capital that has been called, leaving a net cash flow of about $398 million,” he said. “There continues to be a strong environment in PE for increase in value and, as well, exits.”