Despite the first quarter having come and gone, many limited partners are still formulating their investment plans for 2009.
While the roughly 30% bounce up in the U.S. public markets off their near-term lows in early March has gone some ways toward alleviating the denominator effect, a number of LPs, constrained by a lack of liquidity due to scant exits, have already determined they most likely will not commit to private equity this year.
Others are still on the fence, taking a more opportunistic approach, but also content to sit on their hands.
“There may be an exception [to not committing this year], but right now liquidity trumps opportunity,” says administrator Peter Woodford.
Michigan’s target allocation to private equity is 16% of its $44 billion of total assets, with a range of 10% to 17 percent. As of Dec. 31, the actual allocation stood at 19 percent.
Also unlikely to commit to private equity in 2009 is the $1.8 billion
The LP “must focus on liquidity issues for 2009,” says John Boudinot, executive director. He adds that no allocations are expected to be forthcoming.
The $692 million
Other LPs simply don’t know when or how much they might be committing this year.
For example, the $40 billion
Meantime, the $8.2 billion
The LP expanded its private equity allocation range when the actual allocation surpassed its upper threshold for the asset class, but since then, the allocation has fallen back within range. Currently, LACERS is in the middle of an asset allocation review that will determine how much more, if any, it will commit to private equity over the next one to three years, says CIO Dan Gallagher. As of April 2, the LP had an actual allocation to private equity of 10.4%, above its 8% target, but within its range of 3% to 12.5 percent.
The $1.3 billion county pension fund has a relatively new private equity program, begun in 2005, with a target allocation of 5%, and it usually commits $20 million to $40 million annually to the asset class. Yett says the LP has more to spend to reach its target, but he adds there’s no sense of urgency to do so. He’s looking at all strategies and regions of the world, including emerging markets. —Nancy Gordon