Virginia hikes PE allocation in wake of pandemic “market action”

Virginia Retirement System‘s board earlier this month approved a plan to fast-track its new private equity target allocation due to the coronavirus crisis, the pension confirmed to Buyouts.

Last year, the pension system decided to increase its private equity allocation target from 11 percent to 13 percent by July 2021. The target weight for July 2020 was 12 percent.

However, according to documents posted on its website, the weight of the fund’s private equity program as of its April 16 meeting was 13.7 percent, meaning it had passed both its July 2020 and July 2021 targets due to “recent market action.”

Therefore, the target weight for the pension’s private equity program was set at 13 percent as of April 1, with an 8-to-18-percent allowable range. The target long-term weight is 14 percent.

Chief investment officer Ronald Schmitz recommended to the board this remain in effect for FY21. At the end of each fiscal year, Schmitz may make recommendations for new target allocations.

The pension also made some commitments seemingly well-suited to the market dislocation.

This included $300 million to a direct lending-focused separate account with WhiteHorse Capital, H.I.G. Capital‘s direct lending arm. The pension also committed $250 million to Ares Management‘s Pathfinder fund, a re-vamped version of its asset-backed lending fund series, as Buyouts reported.

In an email to Buyouts, Virginia spokeswoman Jeanne Chenault did not comment on whether these commitments were decided upon before or after the recent market chaos. “They fit within the strategies of the portfolio,” she wrote.

As of April 8, Virginia’s private equity holdings were valued at $11.1 billion. The total fund was valued at $77.8 billion.

Action Item: read the material for Virginia’s April 16 board of trustees meeting here.