Firms & Funds

Rhode Island pencils in $265 mln of commitments per year through 2022

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hode Island State Investment Commission, pension fund, private equity
The Rhode Island statehouse is seen from the highway in Providence, Rhode Island November 17, 2009. Photo courtesy Reuters/Brian Snyder - RTXQV4L
  • Rhode Island underallocated to PE
  • Plan would roughly double allocation over five years
  • Portfolio includes exposure to Advent, Bain funds

Rhode Island State Investment Commissionplans to commit around $265 million annually to private equity over each of the next five years, an investment plan prepared by its consultant, Cliffwater, shows.

The $8.17 billion state pension plan has 5.8 percent of its assets in private equity, a little more than half its 11.25 percent target allocation. Under Cliffwater’s plan, Rhode Island would commit $20 million to $60 million across five to 10 funds per year through 2022, which should bring the PE portfolio in line with its asset-allocation target.

The surge in commitments will likely result in Rhode Island’s PE program having negative cash flows for the next few years, according to the report. That’s a common side effect for institutions that dramatically increase their allocations to an illiquid asset class over a relatively short period.

“We’re in the process of trying to ramp up our PE exposure by about 5 percent over the next five years,” said Evan England, spokesman for Rhode Island Treasurer Seth Magaziner.

Rhode Island held about $559.4 million in exposure to private equity assets as of Aug. 31, according to a recent investment report.

In June, the commission approved a $40 million allocation to Alteris Health Partners IV for private equity investments in North American mid-market healthcare companies. The portfolio also includes commitments to firms like Advent International, Bain Capital and TPG.

Action Item: More on Rhode Island’s investment commission: http://data.treasury.ri.gov/