Sacramento County to reduce private equity pace in 2023

The denominator effect boosted the system’s allocation to private equity, forcing it to slow down its commitment schedule.

Sacramento County Employees’ Retirement System will reduce its private equity pacing plan in 2023 as it seeks to reduce its overweight allocation to the asset class.

Many public pension systems have found themselves overallocated to private equity amid a decline in the value of their overall portfolios. Some retirement systems plan on reducing their pacing plan to find their way back to their targeted range.

Sacramento’s board approved the 2023 pacing plan put forward by the system’s investment staff at its board meeting on November 16. Buyouts reviewed a presentation outlining the plan.

Sacramento plans on targeting $260 million in commitments in 2023, down from the $340 million in commitments the $11.8 billion system made to date this year, according to the presentation.

Sacramento’s actual allocation to private equity stands at 15.4 percent, above its 11 percent target, according to the presentation.

The retirement system also plans on shrinking its pacing plan to between $200 million to $300 million. Last year’s range was set between $250 million and $400 million, according to the presentation.

Staff also recommended the system target nine commitments and reduce the average commitment size to $30 million in 2023, according to the presentation.

The recommended plan would target commitments to five buyout funds, one distressed fund, two VC funds and one growth equity fund, according to the presentation.

Staff also recommended the system prioritize follow-on investments with existing managers.

Sacramento also is evaluating a potential secondaries sale across its portfolio and implementing a co-investment program, according to the presentation.

Sacramento uses Cliffwater as its alternative investment adviser.

Los Angeles City Employees’ Retirement System investment staff also recently recommended reducing its private equity pacing plan at its November meeting.