Overview – Q3 2020
Total reported commitments by public pension plans to Private Equity funds reached $20 billion in the third quarter of 2020 with an average commitment size of $101 million. The total was 12% higher than the $17.8 billion of commitments reported in Q3 2019. In total, 198 commitments were reported in the quarter.
This was the second consecutive quarter where 2020 reported commitments surpassed 2019 figures suggesting that despite the remote nature of fundraising today, public plans are continuing to execute on their commitment plans and deploy capital.
As of September 30, 2020, 93 public plans were under allocated against their Private Equity target allocations, representing over $25 billion of potential commitments available for fund managers.
Top Funds & Activity – September 2020
CalPERS reported eleven commitments to 10 fund managers for a total of $4.7 billion in reported commitments in September, approximately 40% of all reported commitments for the month. The largest allocation of $850 million went to CVC Credit Partners and was closely followed by a reported $800 million commitment to Silver Lake Partners.
The CalPERS allocation to CVC was the single largest reported in the month and the fund manager also had the distinction of being the most popular destination for reported commitments in September. Other public plans committing to CVC include New York City Fire, State of Michigan Retirement Systems, and Wisconsin Investment Board.
For Wisconsin Investment Board, their €250 million allocation to CVC was the largest of the fourteen commitments they reported in September. The public plan also committed $200 million to GSO Capital Partners and $100 million each to Thoma Bravo and Ares Management. In total, Wisconsin Investment Board reported $1.24 billion in private equity commitments.
Washington State Investment Board (WSIB) was also active in September with $825 million in reported commitments. The plan committed $250 million each to FountainVest Capital Partners Fund IV and Technology Crossover Ventures IX. The commitment to TCV will be the tenth time WSIB had invested with the famed venture capital firm. Each of the plan’s commitments were also reviewed and recommended by their consultant, Hamilton Lane.
In addition to CVC, Francisco Partners and Stellex Capital Management were among the most popular destinations for capital in September.
Most Viewed Documents – September 2020
The most viewed Private Equity document in September was a Co-Investment Educational Presentation from consultant Aksia for their client Orange County ERS. The document outlines the basics of what co-investments are and how they can be an attractive investment option for institutional investors. It then goes into detail on the key benefits and considerations of co-investment opportunities that apply specifically to Orange County ERS. For fund managers pitching their co-investment opportunities, documents like these are a goldmine of information. They serve as a roadmap for how to pitch to the investor and offer insight into how Aksia thinks about co-investments.
The Private Equity Program Review for Michigan Retirement Systems was also widely viewed in September. The document was added to Market Lens on August 31, 2020 in advance of the pension plan’s board meeting on September 10, 2020. In the strategy update, the document notes, that “for the next twelve months [the plan] will focus primarily on existing sponsors raising successor funds,” with a preference for buyouts, venture, secondary, and growth equity funds.
Fund manager Adams Street’s slide deck for a presentation to North Dakota State Investment Board was also popular in the month. The document, which outlined the manager’s customized portfolio solutions, was presented on September 25, 2020 and made available to Market Lens users on September 21, 2020.
Overview of Reported | Sep-2020 |
---|---|
Commitments | 104 |
Total Amount (USD MM) | $11,882 |
Average Amount (USD MM) | $115 |
Total LPs | 34 |
Opportunities for GPs | As of 30/09/20 |
Public Plans Underallocated vs Target | 93 |
Total Underallocated (USD MM) | $25,427 |
Most Active Public Plans by Number of Commitments |
L3M |
Wisconsin Investment Board | 13 |
New York State Teachers | 10 |
CalPERS | 10 |
Most Active Public Plans by Commitment Amount (USD MM) |
L3M |
CalPERS | $4,727 |
Washington State (WSIB) | $1,968 |
New York State Teachers | $1,761 |
Consultants Providing Most Recommendations |
L3M |
Hamilton Lane | 28 |
StepStone | 17 |
Meketa Investment Group | 10 |
Overview – Q3 2020
Total reported commitments by public pension plans to Private Debt funds reached $6.2 billion in Q3 2020 signaling continued strong demand from investors for the asset class. Although the third quarter figure is a decrease from the $8.3 billion reported in Q2 2020, it is 21% higher than total reported commitments in the third quarter of 2019. When comparing year to date results, reported commitments by public pension plans in 2020 have outpaced those through the first 3 quarters of 2019 by nearly 11%.
The average reported commitment size in the third quarter was $108 million across 57 commitments.
As of September 30, 2020, 39 public plans were under allocated against their Private Debt target allocations, representing nearly $14 billion of potential commitments available for fund managers.
Top Funds & Activity – September 2020
Virginia Retirement System reported the two largest commitments in September combining for a total of $500 million. The plan allocated $300 million to Ares Capital Europe V, which plan documents describe as, “a closed-end fund that will directly originate and provide one-stop, flexible and scaled debt capital to European middle market companies.” The other reported commitment, of $200 million, went to Audax Mezzanine V.
Audax also received a reported $50 million commitment from Alaska Permanent.
The most active allocator in terms of number of commitments in the month was Indiana Public Retirement System, with $395 million committed across three fund managers. The largest commitment of the three, $120 million, went to Waterfall Asset Management’s Waterfall Victoria Fund. According to the investment memo, the fund is focused primarily on residential mortgages and consumer-based loans in the U.S. and western Europe. The plan’s other two reported commitments went to GSO Capital and Oaktree.
Another notable commitment in the month was Fresno City Retirement’s reported $150 million allocation to Arcmont. Plan documents indicate the commitment will be a separately managed account that will satisfy the Fresno City Retirement’s European private credit/direct lending mandate.
In addition to Audax, the only other Private Debt fund manager to receive multiple commitments from public plans in the month was Nexus Capital. The manager closed reported commitments from Baltimore City Fire & Police and Hartford City Muni.
Most Viewed Documents – September 2020
September’s most viewed Private Debt document was an update presentation on the asset class from consultant StepStone for their client Contra Costa County ERA. The presentation thoroughly outlines the outlook and investment implications of the COVID-19 crisis on credit markets and discusses the potential opportunities available in the direct lending space. For a fund manager fundraising and investing in the asset class, the presentation offers valuable market insights. Stepstone notes that the post COVID-19 vintages will be attractive with regards to increased spreads, lower leverage, and industry/company selection.
Another oft-viewed document in the month was a summary from a September board meeting for Fresno County ERA. In it, the pension plan discusses potential options for its private credit portfolio. The plan’s board is deciding whether to re-up on a relationship with Carlyle, implement a new 3-year pacing plan with their consultant Verus, or enter into an external advisor relationship with Aksia, where the consultant would provide deal sourcing and due diligence. The document is another example of useful competitive intelligence for fundraising managers.
Also popular in September was an update from a recent board meeting for Stanislaus Country ERA. The document discusses recent portfolio activity and the onboarding process with their new consultant, NEPC. It goes on to announce their plans to add a new $55-60 million private debt allocation.
Overview of Reported | Sep-2020 |
---|---|
Commitments | 21 |
Total Amount (USD MM) | $1,503 |
Average Amount (USD MM) | $72 |
Total LPs | 12 |
Opportunities for GPs | As of 30/09/20 |
Public Plans Underallocated vs Target | 39 |
Total Underallocated (USD MM) | $13,887 |
Most Active Public Plans by Number of Commitments |
L3M |
Virginia Retirement System | 5 |
San Francisco ERS | 4 |
Connecticut / University of Michigan | 4 / 4 |
Most Active Public Plans by Commitment Amount (USD MM) |
L3M |
Virginia Retirement System | $1,825 |
Connecticut | $1,013 |
New York State Teachers | $475 |
Consultants Providing Most Recommendations |
L3M |
Meketa Investment Group | 5 |
Hamilton Lane | 4 |
NEPC | 3 |
Overview – Q3 2020
Despite a rebound in the month of September, on a quarterly and year-over-year basis reported commitments to Real Estate continue to lag in 2020. Total reported commitments to the asset class in the third quarter equaled $5.0 billion, roughly half the total seen in Q3 2019. Year to date, 2020 is also trailing 2019 figures by 26%. The asset class has not fared as well as Private Equity and Private Debt in the wake of the pandemic.
As of September 30, 2020, 94 public plans were under allocated against their Real Estate target allocations, representing nearly $41 billion of potential commitments available for fund managers.
Top Funds & Activity – September 2020
Alaska Permanent was the most active pension plan investor in Real Estate for September with $1.25 billion in reported commitments. The largest commitment by Alaska Permanent was also the largest of any reported in the month: $700 million to a domestic REIT account managed by AEW Capital Management. According to plan documents, the REIT will have, “an approximate 70%/30% split between multi-family and industrial REITs, respectively.” Additionally, the plan allocated a combined $450 million to real estate debt strategies managed by Kayne Anderson Capital Advisors and Mesa West Capital.
The second largest commitment reported in September was a $400 million commitment from Louisiana Teachers to Morgan Stanley Prime Property Fund. A presentation for the fund described its strategy as focused on, “high quality office assets, Class A multifamily communities, warehouse distribution and storage facilities, and top tier super regional malls in targeted primary markets within the U.S.” The commitment was recommended by Louisiana Teachers’ consultant Hamilton Lane. The plan also reported a $50 million commitment to Waterton Residential
Another interesting commitment reported in the quarter was Massachusetts PRIM’s $200 million allocation to Blackstone Property Associates. According to the investment recommendation, the commitment was to a co-investment opportunity in life sciences properties, that is: office space designed for occupancy by life sciences companies. The memo notes, “The life sciences industry is poised to benefit from increasing demand as the population ages and there is a greater need for pharmaceuticals and medical devices… Moreover, technology is accelerating advancement in healthcare and is expected to increase the need for R&D space, diagnostic centers, and healthcare facilities.” The investment will seek to capitalize on demand for this type of office space in the coming years.
Most Viewed Documents
Consultant StepStone’s FY2021 Real Estate and Real Assets Tactical Plan for client Illinois Teachers was the most viewed document for the asset class in September. The document focuses primarily real estate but also covers infrastructure, timber, agriculture, and real assets special situations. With regards to real estate, the tactical plan indicates that in FY2020, the pension plan committed $471 million to value-add real estate strategies and $60 million to core real estate strategies.
Moving into FY2021, the pension plan is solely focused on expanding their opportunistic real estate holdings with a target allocation of $440 million. The tactical plan also highlights emerging manager investing as one of Illinois Teachers’ initiatives for 2021, “Continue development of the emerging manager platform. Identifying emerging managers can be accretive to the overall Portfolio by serving to diversify the TRS plan. TRS will continue to look for emerging managers that area fit for portfolio objectives.”
Also popular in the month was a presentation for Oaktree Real Estate Opportunities Fund VIII to San Diego City ERS. The slide deck was presented on September 10, 2020 and made available to users in Market Lens on September 8, 2020.
Overview of Reported | Sep-2020 |
---|---|
Commitments | 42 |
Total Amount (USD MM) | $3,564 |
Average Amount (USD MM) | $94 |
Total LPs | 22 |
Opportunities for GPs | As of 30/09/20 |
Public Plans Underallocated vs Target | 94 |
Total Underallocated (USD MM) | $40,815 |
Most Active Public Plans by Number of Commitments |
L3M |
New York City ERS (NYCERS) | 5 |
NY State Common Retirement Fund | 5 |
New York City Teachers | 5 |
Most Active Public Plans by Commitment Amount (USD MM) |
L3M |
Alaska Permanent | $1,250 |
New York State Common Retirement Fund | $569 |
Louisiana Teachers | $450 |
Consultants Providing Most Recommendations |
L3M |
StepStone | 13 |
Townsend Group (acquired by Aon) | 7 |
NEPC | 4 |
Overview – Q3 2020
Like Real Estate, demand for Real Assets in 2020 has lagged 2019. Public plans reported commitments of $3.0 billion to the asset class in the third quarter, a more that 40% drop from the same period in 2019. When looking at the year to date figures, Real Assets funds have attracted $8.6 billion in reported commitments from public pension plans, a far cry from the $19.1 billion reported through three quarters in 2019. It may be that the global economic slowdown resulting from the pandemic is pushing investors away from Real Assets funds for the foreseeable future.
As of September 30, 2020, 69 public plans were under allocated against their Real Assets target allocations, representing nearly $24 billion of potential commitments available for fund managers.
Top Funds & Activity
In what was an especially tepid month for the asset class, North Dakota Land Board was the only public plan to report a Real Assets commitment over $100 million. The plan reported a $130 million commitment to JP Morgan’s Infrastructure Investments Fund. A presentation for the fund describes it as an open-ended strategy focused on core and core plus infrastructure assets that offers investors diversification, inflation protection, and cash yield.
The most popular destination for Real Assets commitments in the month was EQT Fund Management. The Stockholm based manager received reported commitments from Houston Firefighters, NYCERS, and New York City Teachers.
Rhode Island ERS reported a commitment of $60 million to I Squared Capital with $50 million allocated to their latest global infrastructure fund and $10 million allocated to a co-invest vehicle.
Illinois SURS also reported a commitment of $60 million with their allocation to Homestead Capital USA Farmland Fund III, the plan’s first ever commitment to a farmland strategy.
Most Viewed Documents
For Real Assets, the most popular document in the month was the Annual Review and Forward Plan for Oregon Public ERF’s alternative portfolio. The pension plan has a 15% total portfolio target allocation for the alternatives portfolio which is composed of “Diversifying Strategies” (7.5%), natural resources (4.5%), and infrastructure (3.0%).
The document goes on to note that due to outperformance of the infrastructure holdings, the portfolio is currently overweight in the asset class. Slower deployment has led to underweighting in natural resources, which perhaps signals an opportunity for managers fundraising in that asset class to add Oregon Public ERF to their outreach lists.
Another popular fund manager presentation deck from the month was that of JP Morgan Infrastructure Investment Fund. As discussed in the Top Funds & Activity section, the investor was North Dakota Land Board.
Overview of Reported | Sep-2020 |
---|---|
Commitments | 8 |
Total Amount (USD MM) | $462 |
Average Amount (USD MM) | $58 |
Total LPs | 8 |
Opportunities for GPs | As of 30/09/20 |
Public Plans Underallocated vs Target | 69 |
Total Underallocated (USD MM) | $23,693 |
Most Active Public Plans by Number of Commitments |
L3M |
Border to Coast Pool | 8 |
Illinois Teachers | 3 |
Sacramento County ERS | 3 |
Most Active Public Plans by Commitment Amount (USD MM) |
L3M |
Border to Coast Pool | $840 |
Illinois Teachers | $700 |
Pennsylvania Public Schools | $400 |
Consultants Providing Most Recommendations |
L3M |
Hamilton Lane | 3 |
Verus / StepStone / Aksia | 2 / 2 / 2 |
Graystone Consulting (Morgan Stanley) | 2 |
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