Vermont considers taking bigger scoop of PE

  • New allocation would boost PE target from 3 to 5 pct
  • NEPC-recommended mix increases targets for real estate, hedge funds
  • Vermont values its PE portfolio at $35 mln

The Vermont Pension Investment Committee is considering a new asset allocation mix that would almost double its private equity target, according to a report by consultant NEPC.

The report, which was obtained through a records request, shows NEPC recommended Vermont increase its allocation to 5 percent from its current target of 3 percent. Vermont is also considering asset allocation mixes that would increase its private equity target to as high as 7 percent, according to the report.

“We are currently in the process of looking at our asset allocation but have not made a final determination,” Vermont Policy Director Tim Lueders-Dumont said in an email.

The mix recommended by NEPC reduces the allocation targets for a variety of fixed-income products, including global bonds, while increasing its allocation to alternative assets. In addition to a higher allocation to private equity, the new mix would also increase Vermont’s real estate target from 6 percent to 8 percent and boost its target for hedge funds from 5 percent to 8 percent.

The higher allocations to alternative assets should result in higher returns, according to NEPC’s projections. The new asset allocation would generate a geometric expected return of 7.4 percent, compared to 7.2 percent under the current mix.

The Pension Investment Committee oversees a little less than $4 billion of assets on behalf of Vermont’s retirement systems. The state valued its private equity portfolio at approximately $35 million as of June 30, according to pension documents.

In April, the Pension Investment Committee approved a $50 million commitment to fund-of-funds HarvourVest Fund Partners X, according to a Pensions & Investments report.

Action Item: See the Vermont state treasurer’s website here: