New GPs should be ‘pleasantly persistent’ to get state pension money

New York State Common Retirement Fund

  • AUM: $207 bln
  • PE Allocation: 7.6 pct actual as of December 2017
  • Amount committed to EMs: $6.2 bln since 1994
  • Number of EM relationships: 121
  • Why this is important: This story offers insights into two large state pensions, which new managers can find difficult to navigate.

If you want to source money from Maryland State Retirement and Pension System, you better bring your A game.

The system, which is open to working with emerging managers, generally re-ups to its bevy of existing GPs, said Dana Johns, senior portfolio manager at the pension system. Johns spoke at Buyouts Insider’s Emerging Manager Connect conference in New York June 26.

“The bar is fairly high to get into the portfolio,” she said. She noted that of the $1.5 billion in commitments the Maryland retirement system makes each year, “90 to 95 percent” are with existing managers.

While the bar is high, “Maryland is very committed to investing in emerging managers,” Johns said. “I personally have backed first-time funds and we will look at first-time funds.” Since 2009, the state pension has committed about $2.5 billion to emerging managers, defined as Funds I, II or III.

Managers interested in getting a commitment from Maryland’s system need to keep at it until they get through. “For us, it’s fairly simple: Send me an email [and] be pleasantly persistent,” Johns said. “My inbox is full most the time. I do try to respond.”

New York State Common Retirement Fund is also on the lookout for promising new managers, said Brian Hughes, director of the retirement system’s private equity program.

“We’re looking to source managers early in their development and have them in the pipeline for the future of the private equity program,” he said.

New York State Common sources emerging managers primarily through its fund-of-funds, which is managed by Muller & Monroe Asset Management and HarbourVest Partners, Hughes said. The system, which has about $207 billion of assets under management, has committed around $6.2 billion to emerging managers across the portfolio since 1994, he said. The fund-of-funds committed an additional $3 billion since 2007, directed mostly as smaller first-, second- and third-time funds, he added.

The goal of the emerging manager program is to graduate nascent managers from the fund-of-funds program into the core portfolio, Hughes said. Overall, New York State Common has 121 emerging manager relationships, he said.

Part of the challenge for New York State Common is that is doesn’t generally look at funds under $1 billion for its core portfolio. While funds of $100 million, $200 million or $300 million are fine in the fund-of-funds program, funds of that size won’t work for the core program, he said.

“We don’t have a way to target [small emerging managers] right now,” Hughes said. “We’re looking at some programmatic changes to allow us to continue supporting those managers.”

Action Item: Read more about New York State Common here: