by Andrés Ramos, Content Marketing Specialist – Nasdaq Private Fund Solutions
Setting a course for a new year
On November 17, 2021, the board of Contra Costa County ERA (CCCERA) met with their consultant StepStone Group for a private equity portfolio update.
After a market overview where StepStone notes the rapid pace of capital deployment and record levels of U.S. transaction volume in 2021, the update meeting moves to a pacing analysis for CCCERA’s private equity portfolio. It is this portion of the update where fund managers will find the pension plan’s strategic plan for 2022.
In this blog post we explore how private fund managers can use the insights from the plan to inform their fundraising process.
Increases in private equity portfolio allocations
The most compelling takeaway from the pacing analysis is the impact of CCCERA’s revised target private equity allocation, which increased from 11% to 15% in 2021. Over the next 10 years, the plan will seek to reach a $2.5 billion private equity portfolio.
To reach this target allocation, CCCERA will target annual commitments of $450 million for the next decade. This projected pacing represents a massive opportunity for fundraising GPs, especially those managers seeking to build new LP relationships, as we’ll learn in the next section.
Understanding existing commitment habits to identify opportunities
The third portion of StepStone’s update for CCCERA provides a look at the plan’s existing portfolio to discuss how performance is progressing, as well as the various sector, strategy, and fund type exposures of the portfolio. For fundraising GPs however, the most valuable piece of intelligence lies in a table titled “Private Equity Performance by Sub-Portfolio.”
StepStone breaks down the plan’s portfolio into two segments, each labeled ‘legacy,’ and a third labeled ‘core’ noting, “as the size of the Core Primary Fund Portfolio increases, the Legacy FOF and Legacy Primary Fund Portfolios should be less meaningful drivers of CCCERA’s total PE Portfolio performance.”
This suggests that CCCERA will no longer be making commitments to any fund managers in the legacy portfolio and will be eager to build new relationships to reach their $450 million annual commitment target. The existing core primary fund portfolio consists of seven funds with $331.5 million in committed capital and an average bite size of $47.4 million per commitment. Even if CCCERA re-ups with these core managers there are still plenty of opportunities for new GPs to win allocations in 2022 and beyond.
LP Portfolio intelligence that helps win allocations
When GPs can gather actionable intelligence about institutional investors with open allocations and interest in their respective strategies, they are able to spend more time on high probability targets and less time in LP meetings taken out of curiosity.
In a crowded market that can mean the difference between hitting a hard cap and delaying a final close.