Ashbel “Ash” Williams, the chief investment officer of the
Williams emphasized that the aim of such an increase, if it were to be approved, would be to increase diversification, not boost returns at the expense of additional risk. While the proposed increase to private equity would be modest—an additional 1 percent, or about $1.6 billion—the new money aimed at hedge funds could go from zero to 6 percent of Florida’s overall portfolio. Currently, private equity accounts for 4 percent of assets, or slightly more than $6 billion.
Even if such a plan to raise limits on alternative investments were passed by the legislature, Williams said, it would take years to implement fully. He made his comments at Super Return, a private equity conference held this month in Boston.
Florida’s pension system, with $160 billion in assets, is larger and better funded than many other state pensions that have also sought to increase their caps and target allocations for alternatives. Some pensions are thought to be trying to “catch up” by investing in alternatives more aggressively at a time when many state budgets are severely constrained.
New Jersey, for instance, just raised its cap on alternative investments to 38 percent and its alternatives target to 25.5 percent. The latest data from the Pew Center on the States says that New Jersey only has enough pension assets to meet 66 percent of its liabilities.
Illinois, a state that is only able to meet 51 percent of its liabilities, according to Pew, issued a $3.7 billion bond in February to help raise funds to meet the state’s pension obligations.
Asked what he would do in such a situation, Williams told Buyouts “there is no free lunch,” adding that imbalances like those in other states would have to be made up by either raising assets or cutting promised benefits. “I’m sure everybody is doing the best they can,” he said.