San Bernardino pledges $40 mln to Aberdeen secondaries fund, clears pacing plan

  • $40 mln is jump from $25 mln pledged to prior funds
  • Aberdeen Secondary Opportunities IV target $500 mln
  • SBCERA aims $500 mln to PE in 2019, matching 2018

San Bernardino County Employees’ Retirement Association’s investment committee committed $40 million to a PE secondaries fund managed by Aberdeen Standard Investments, while also approving a pacing plan that would commit another $500 million to the asset class in 2019.

The $10.4 billion retirement plan has a target allocation of 16 percent to private equity with a current allocation of 13.2 percent. If the Aberdeen commitment is approved by the full board, it will bring SBCERA’s total PE commitment for 2018 to $500 million, meeting its target.

SBCERA has partnered with Aberdeen since 2002. It was a cornerstone investor in the firm’s secondary fund raised in 2013, with a $25 million commitment that helped drive strategy and terms. The agency subsequently invested $25 million in each of Aberdeen’s second and third secondaries funds, in 2014 and 2016.

Aberdeen Secondary Opportunities IV’s target size is $500 million, with a final close expected in Q4 2019, pension-fund documents show. Aberdeen’s three prior funds raised a total of $909 million from investors, and all three have performed to expectations, according to SBCERA.

Aberdeen is expected to follow a strategy similar to that of its predecessor funds, according to SBCERA, with 40 to 60 percent of the portfolio going to buyouts.

The system targets 20 to 40 percent to venture capital, with an opportunistic allocation to credit, natural resources and growth funds.

The system expanded its definition of complex and opportunistic secondary deals to include various types of GP-led transactions, including full fund deals and single assets or more concentrated portfolios.

As well, the system includes portfolios with real estate, infrastructure or credit funds and portfolios that include direct co-investment interests in PE assets. Aberdeen’s previous secondaries funds have made the majority of their investments in the U.K., with most of the rest in North America.

The retirement system plans to commit another $500 million in 2019 and then raise its commitment pace to $625 million in 2020 and $650 million in 2021. SBCERA has already earmarked $270 million of its 2019 allocation to existing master custody account relationships, with a reserve of $230 million for new investment opportunities.

SBCERA will target investments with stronger early distribution characteristics, across several types of strategies, including distressed debt, direct lending, mezzanine debt, equity buyout, growth equity and venture.

Action Item: Aberdeen’s latest secondaries fund: