PA SERS commits $175 mln to private equity

  • PA SERS is below its 16 pct allocation target for PE
  • System has a $650 mln annual pacing plan
  • New commitments focus on software, upstream oil and gas

Pennsylvania State Employees’ Retirement System at its Sept. 12 meeting approved $175 million in three PE commitments.

The retirement system committed up to

  • $75 million to Vista Equity Partners Fund VII, which invests in enterprise-software companies and has a target size of more than $12 billion;
  • $75 million to NGP Natural Resources XII, a $5.3 billion vehicle Carlyle Group is raising to invest in upstream oil-and-gas assets;
  • $25 million to NGP Keystone, a related vehicle that makes control upstream oil-and-gas investments, using a buy-and-build strategy in North America

The investments will be funded from cash, according to a news release.

Private equity makes up 13.7 percent of the total fund, compared with a policy target of 16 percent. Buyouts are 8.4 percent of that total, while venture capital is 3.1 percent and special situations are 2.2 percent, according to an unaudited fund summary from March 31, 2018.

The system has a $650 million annual pacing plan for PE, as part of the 2018-2019 investment plan that PA SERS’s board adopted on April 25.

The plan calls for prioritizing PE commitments of $75 million or more in best-in-class funds. The system hopes this will help it build long-term strategic partnerships, improve operational efficiency by reducing the number of funds, and improve its ability to negotiate lower management fees.

Commitments smaller than $75 million are considered case by case. PA SERS also plans to research PE co-investment options to further reduce costs.

At the September meeting, PA SERS also approved a suite of retirement-date funds for the commonwealth’s soon-to-launch defined-contribution plan, and approved several updates for its comprehensive governance manual.

Action Item: Read PA SERS 2018-2019 Investment Plan here: