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Slower GP deployment hampers NH’s 2019 PE pacing plan

  • AUM: $8.7 bln
  • PE allocation: $992 mln
  • Actual allocation to PE: 10.3 pct
  • Whom to contact for a meeting: Marty Karlon (marty.karlon@nhrs.org)
  • Why this is important: The pension system will commit only $50 mln to $75 mln this year

New Hampshire Retirement System will commit less than a quarter of its annual pacing for private equity and private debt in 2019, a presentation by NEPC, its investment consultant, shows.

That’s because several funds to which the pension system committed in 2017 and 2018 had not started drawing capital. These funds would be considered vintage-year 2019 funds, the report said.

Thus New Hampshire already had $365 million in commitments for 2019, Director of Investments Larry Johansen said, according to the minutes of the January board meeting.

Which funds New Hampshire will consider vintage 2019 is unclear, but it committed $325 million across three PE and five private-debt funds in 2018. The pension also committed $315 million across five PE funds and two private-debt funds in 2017.

A December 2018 review showed that of 55 commitments to the asset class, 39 were meeting expectations, four were cause for concern and 12 commitments had a year or less of operations, Johansen said.

Commitments in 2019

The system’s annual pacing is $300 million to $400 million for its PE and private-debt portfolio, but it will commit only $50 million to $75 million in 2019, pension documents said.

Re-ups would be considered and substrategies would be opportunistically targeted, documents said.

Indeed, New Hampshire’s PE commitments in the past two years were mainly re-ups to funds from Carlyle Group, BlackRock, Edgewater Capital Partners, Industry Ventures, Thoma Bravo and Warburg Pincus.

Apollo and Actis were the only two new relationships in 2017. There were no new relationships in 2018.

New Hampshire’s PE and private-debt portfolio was doing extremely well, Johansen said.

The $992 million PE portfolio was invested across 30 managers and 36 funds and produced an internal rate of return of 11.58 percent since inception as of Dec. 31, 2018, documents said.

New Hampshire’s PE portfolio returned 17.3 percent over one year, 12.8 percent over three years, 11.3 percent over five years and 4.7 percent over 10 years as of Sept 30, 2018.

Action Item: Read more on NHRS’s investments: https://bit.ly/2DfNo1w