County Pension Ready For PE

The San Bernardino County Employees’ Retirement System (SBCERA) is ready to take the plunge into the deep waters of private equity.

By the end of the first quarter, the $3.4 billion pension fund expects to have a consultant in place to manage its first ever private equity allocation, says Donald Price, the fund’s investment analyst.

SBCERA will put up to $185 million of its assets into private equity, a 5.4% allocation, shifting capital away from domestic public equity and international fixed income.

About 70%, or $130 million, of its private equity allocation will go to a fund-of-funds manager to invest in domestic private equity funds. The remaining 30%, or $55 million, will go into a European fund-of-funds manager.

Boston-based Adams Street Partners and Los Angeles-based Pathway Capital Management are vying for the domestic funds manager job. SBCERA’s investment committee will make a final decision within the next month. SBCERA will kick off a search for a European funds manager in March and plans to have a decision made for that by June, Price says.

Adams Street and Pathway were named to the short list months ago, but the two were kept waiting as SBCERA’s private equity program fell victim to a severed relationship with Cooper Consultants of Oakland, Calif.

Cooper, in fact, laid the foundation for SBCERA’s private equity program in summer 2002, but when its contract was terminated in March and New England Pension Consultants of Cambridge, Mass. stepped in, the program was put under review.

Year to date, SBCERA has posted a 13.5% return, putting the plan just above the 12% mark it needs to meet its fund obligations. It expects a 10% return on its private equity portfolio.