State of Wisconsin Investment Board may bump up its target allocation to private equity and debt, considering the hike at a time of slower commitment activity across the industry.
The $151.1 billion Wisconsin pension system is the latest institutional investing behemoth considering raising its potential exposure to private markets. Allocators following this path have done so as rising interest rates have forced a readjustment of long-term views across several asset classes, with private markets often winning the day.
Wisconsin will discuss its asset allocation mix at workshops scheduled for October 17 and October 18.
Buyouts reviewed a presentation from consultant NEPC detailing the proposed target changes. Wisconsin does not broadcast its meetings and workshops.
According to the presentation, Wisconsin’s new private equity and debt target would rise to 18 percent from its current 15 percent target, pending board approval.
The system currently allocates close to 18 percent of its total fund to a private equity and private debt investment bucket, the presentation said. The proposed target allocation effectively places a new floor on how much Wisconsin will commit to the strategies.
The system targets 85 percent of this bucket to private equity and the remainder to private debt.
Wisconsin’s private equity and debt basket is expected to earn a 10-year return of 8.4 percent, NEPC said.
According to the presentation, the system plans on reducing the share of its publicly traded equities in its allocation to 42 percent, from 48 percent.
Much of the S&P 500’s gains in recent months have been attributed to the success of a few “mega-cap” companies that have driven the valuations of the entire index above average price-to-earnings levels, NEPC said.
A spokesperson from State of Wisconsin Investment Board declined to comment on this story.