by Andrés Ramos, Content Marketing Specialist – eVestment Private Markets
Each month, thousands of documents are added and viewed on eVestment’s Market Lens platform. In February, one of the most viewed documents was a Private Markets Pacing Analysis presentation from consultant RVK for Vermont Pension Investment Committee (VPIC). VPIC is responsible for administering the assets of the public employees of the state of Vermont and is an active investor in the private markets. The presentation discloses the target allocations VPIC has for private equity and private credit and outlines RVK’s recommendations for reaching those targets over the following five years.
Let’s explore some of the key insights from the document.
VPIC targets $90 million in 2021 private equity allocations
As of September 30, 2020, RVK reports that VPIC is currently sitting at a 4.5% allocation to private equity against a target allocation of 10%. VPIC’s overall portfolio size is $4.9 billion meaning that this shortfall in private equity represents almost $270 million in open commitment opportunities for fund managers. In the short-term however, RVK has recommended that the pension plan commit $90 million in 2021 to work towards that target.
RVK notes that this amount should be spread over multiple funds and strategies but also assumes a 70/30 split between fund of fund and direct fund investments, respectively, over the next two vintage years. Reviewing VPIC’s existing portfolio reveals that the pension plan has invested primarily through fund of fund and secondaries vehicles.
Increased direct fund investing will be an area of expansion for the plan and RVK notes that VPIC will gradually move to a 50/50 split for new commitments.
Private credit commitments, a focus for 2021 and beyond
In terms of private credit, VPIC is also targeting a 10% target allocation, but has a significantly smaller existing allocation to the asset class, only 2.1% of total assets (also as of September 30, 2020). In 2021, RVK has targeted $165 million in new commitments for plan, split between evergreen ($100 million) and traditional ($65 million) fund structures. Thereafter VPIC will continue to make annual commitments to the asset class to reach their target allocation.
Private credit commitments from VPIC over the last five vintage years have ranged from $50 to $75 million in size. When viewed in unison with the commitment targets, fund managers can expect the pension plan to have capacity for 2-3 new commitments in 2021.
RVK notes that attractive opportunities can be variable in different vintage years signaling that VPIC will likely be open to any compelling private credit opportunities in 2021. That said, the plan has invested consistently in direct lending funds in previous vintage years and that trend is likely to continue moving forward.
Pacing plans offer key insights for capital raising GPs
Insight into investor pacing plan documents can be one of the most powerful tools for GPs. Whether they are currently in capital raising mode or planning to launch a new fund in the near future, having insight into how an LP plans to commit or when they will have capacity is precious insight.
Click the button below to request access to the full pacing plan and its insights on VPIC’s pacing plan for 2021 and beyond.