Missouri Ups PE Target To 7.5 Percent

Over the summer, the Missouri State Employees’ Retirement System hit the ceiling on its target allocation to private equity. It responded by raising the roof, giving it another $168 million to invest in the asset class.

Missouri State Employees’ now plans to devote as much as 7.5 percent of its $8 billion pension fund to private equity, up from 5 percent; it also increased its allocation target to alternative assets to 25 percent, up from 20 percent. To date, the pension fund has shown an appetite for middle-market funds and distressed debt vehicles. Missouri began investing in alternatives in 2002 and has committed to such buyout shops as BLUM Capital Partners LP, Catterton Partners, DDJ Capital Management, Oaktree Capital Management, Relational Investors, Silver Lake Partners, and Wind Point Partners.

As of June 30, Missouri’s actual exposure to alternatives reached 20.1 percent, or $1.6 billion, with 5.4 percent in private equity, according to the pension fund’s Web site. The pension fund’s board of trustees approved the hike in July, said Scott Peppard, the newly installed head of investments for the asset class. The increase preceded his arrival in Jefferson City and came after an asset allocation study, which the board undertakes every five years.

Of the new 25 percent allocation to alternatives, 7.5 percent is earmarked for private equity, 6 percent for timber, 6 percent for real estate, 3 percent for commodities and 2.5 percent for distressed debt.

Peppard joined Missouri State Employee’s in September after more than 15 years with Kansas Public Employees Retirement System, where he oversaw public equity investments. The move was inspired by a desire “to expand my depth of knowledge in several different asset classes,” he said. Missouri’s pension fund is in the process of creating a schedule to establish the pension’s investment pace going forward.

Summit Strategies Group serves as both a general advisor to the pension fund and provides guidance on the alternative asset portfolio.—J.P.