The Florida State Board of Administration, which oversees the $97 billion Florida Retirement System, is looking to boost its exposure to distressed debt, mezzanine and infrastructure funds in a big way.
The limited partner recently revealed the details of its strategic investments program, which had a total of about $4.5 billion in funded and unfunded commitments at the end of January. The program has an allocation target of 3.5 percent with a range of zero to 10 percent. In April 2008, a number of debt-oriented commitments were moved from the private equity portfolio to the strategic investments bucket.
A board document dated March 12 lists a number of potential commitments that could be made by June 30 of this year, although it does note the plan is subject to change. The opportunistic/distressed debt category could get one-to-three pledges totaling between $200 million to $500 million; one-to-three commitments could be made to mezzanine funds for a total of between $75 million to $250 million; and infrastructure could see one-to-three pledges totaling between $250 million and $750 million. Other asset classes in the strategic investments allocation include global equities; activist corporate governance; timberland; and multi-sector strategies.
Hamilton Lane and the Townsend Group are the consultants helping with the opportunistic/distressed debt and mezzanine portions. Mercer is overseeing the infrastructure component by creating a short list of firms with managers to be chosen by the third quarter.
Since December, the LP has made commitments to VSS Structured Capital II and Falcon Strategic Partners III. Pledges under consideration include those to TA Subordinated Debt Fund III; Harch Fund VI; and Levine Leichtman IV.
As part of the Florida Technology and Growth Initiative, the state is in contract negotiations with Hamilton Lane for help finding co-investment opportunities and venture capital and growth capital funds to commit to in early 2009.
Regarding the private equity program, as of January 30, the actual allocation was 4.7 percent, with a target allocation of 3.9 percent and a range of zero to 10 percent. Although the LP doesn’t make forward-looking projections as to how much might be committed in 2009, in calendar-year 2008, the state pledged about $1.72 billion to private equity, according to Dennis MacKee, spokesperson.