L. P. Florida to Look Overseas in 2000

The Florida State Board of Administration’s alternative program, stunted by a period of internal restructuring (BUYOUTS Nov. 22, 1999, p. 4), intends to hire its first international private equity manager and fund of funds manager for a new alternative investments program in the next six to nine months.

Additionally, the Board will continue to explore a strategy of creating a “captive farm team” fund-of-funds approach to more effectively take advantage of opportunities that do not fit cleanly into its core portfolio. The Board is expected to kick off both of these efforts in the second half of the year.

Florida is set to begin making private equity investments for its $102 billion system in 2000. After an active year in 1998 when the pension fund added almost half of its total commitments, last year’s commitments were little to nil.

“As a result of internal change and all of the political issues we had to deal with, last year was very quiet,” said Frank Fernandez, the alternative program’s portfolio manager. “We began the year executing some commitments that remained in the pipeline from 1998, however there was no new activity during the last three quarters of the year.”

Fernandez said that the system won’t be ready to begin earnestly investing until the summer of 2000, but is considering a number of options through which to proceed-one of which includes overseas investments in Europe. Fernandez said the idea to invest overseas originated from a period in 1998 when Irwin Loud was the portfolio manager. However, he also said it was uncertain how the alternative program would proceed because “it was something that was on our radar but we had a number of internal issues [to deal with]most notably transition.”

However, he also said the alternative program was busy building a viable domestic private equity program, but due to internal issues, the international effort had been delayed.

“As a large institutional investor, we are made aware of the opportunities in private equity,” Fernandez said. “This is one of those opportunities that continue to come to us through a number of different sources. There wasn’t one source that made us aware of or caused us to do this. We’re just trying to be opportunistic investors.”

The system currently has 3.2% of assets committed to private equity, with 2.4% to 2.5% already invested. It is also the sole capital investor for New York-based private equity firms Liberty Partners and Lexington Partners.

Although a number of re-ups with existing managers are currently being considered, Fernandez said new commitments are unlikely before this summer.