San Francisco hires J.P. Morgan to distribute PE funds

San Francisco Employees’ Retirement System hired J.P. Morgan Asset Management (JPMAM) to manage and boost the cash proceeds of securities distributed by the system’s private equity funds, a July 10 memo from CIO William Coaker and his investment team shows.

The board sent a Request for Information to six firms as possible managers of the funds, in January 2019. SFERS narrowed the list down to four firms that provided discretionary distribution management services, ultimately choosing JPMAM, according to meeting documents.

JPMAM would manage the public equity shares from the GPs to the LPs, according to meeting notes.

“GPs often monetize their positions through a sale of the company’s stock to the public through an Initial Public Offering,” the memo reads. “Poorly managed sales of in-kind distributions can lead to realized losses, which can materially reduce the overall returns from the private investments.”

General partners use capital from limited partners to fund private market companies in exchange for equity, according to the memo.

“Most of the time [LPs] prefer for that not to happen,” Institutional Limited Partners Association’s Senior Policy Counsel Chris Hayes told Active LPs. “Distributions in kind are generally frowned upon because you’d have to deal with selling the securities. You’d have to dispose of the securities, particularly if they’re not easily marketable.”

SFERS’s private equity portfolio is valued at $4.9 billion and around 10 percent of it is in public positions, according to the memo.