MassPRIM reports nearly 6% private equity markdown

The $88.6bn system is the latest large pension entity to report a sizable loss.

Massachusetts Pension Reserves Investment Management Board reported a quarterly markdown of its private equity portfolio by more than 5 percent.

LPs have been anticipating private equity portfolio markdowns, which haven’t materialized over the first two quarters this year despite heavy swings in public markets. More recent results have been mixed, with some systems reporting no significant losses in the value of their private equity portfolio while others show markdowns of several percentage points.

MassPRIM saw its private equity portfolio lose 5.7 percent gross of fees over the past three months, but still reported one-year gains of 5.3 percent and five-year returns of 24 percent.

The results were revealed at the MassPRIM investment committee meeting held November 15. Buyouts listened to a broadcast of the meeting.

According to documents provided by MassPRIM, funds with a 2012 vintage year were marked down by 19 percent during the quarter, leaving them with net asset value of $458 million. 2015 vintage funds were down 7.5 percent to a $1.9 billion NAV and 2016 vintage funds fell by 9.6 percent to a $834 million NAV.

Mike McGirr, MassPRIM’s director of private equity, said higher interest rates and inflation slowed M&A activity by 20 percent and exits by 30 percent from the same time frame in 2021.

Venture capital and growth equity funds showed the most weakness due to struggles in technology, McGirr said.

This helped the $88.6 billion system avoid more pain as 75 percent of its private equity portfolio is committed to buyout funds.

“We’ve been careful, especially in hiring new managers. Hindsight is 20/20 but we’re happy we did not expand to VCs too quickly during the bull market,” McGirr said.

Through 2022, MassPRIM paid $1.6 billion in contributions and received $1.2 billion in distributions from its private equity portfolio, according to board documents.

“As distributions dry up, it puts pressure on our commitment pace going forward. We expect some adjustments but it’s important to stay the course in these kinds of markets,” McGirr said.