West Virginia approves 5% hike to private market targets

West Virginia Investment Management Board approved a 2 percent increase to its target allocation to private equity for most of the pension systems under its purview.

Public LPs in recent months have debated how to approach private equity this year due to headwinds caused by a predicted recession, rising interest rates and the denominator effect. Many systems have slowed pacing plans for 2023 while keeping target allocations at the same level.

West Virginia’s board approved an increase to its target allocation to private markets by 5 percent, which includes a 2 percent increase to private equity, a 2 percent increase to real estate and a 1 percent increase to private credit while reducing its target to public equities.

This brings the private equity and real estate target allocations to 12 percent, and private credit to 6 percent.

“There’s a qualitative component in private markets that can generate potential alpha. We have the ability to generate greater than expected returns in these asset classes by our selection of quality managers,” said West Virginia chief investment officer Craig Slaughter.

Slaughter said staff conducted a liquidity analysis and found it could handle more investments in private assets despite the challenges facing investors.

“We could even go further but we decided to take a smaller step if anything,” Slaughter said.

The $22.9 billion West Virginia Investment Management Board manages assets for 11 state retirement systems, along with several insurance funds and endowments.