The State Board of Administration of Florida (SBA), one of the US’ biggest public institutional investors in private equity, has lowered its target allocation to secondaries despite it being one of the pension manager’s best performing strategies.
SBA dropped its secondaries allocation to 10 percent of its portfolio, down from its previous target of 12.5 percent, a spokesman confirmed. The pension is currently underweight to secondaries with a 6 percent portfolio exposure, according to materials from its 8 June investment advisory council meeting.
SBA has a “very diversified [secondaries] portfolio containing investments in over 1,000 individual private equity funds,” the materials note.
The pension, which committed $200 million to two secondaries funds last year, aims to commit a further $675 million to secondaries over the next three years to 2019, the materials show.
The $180 billion pension also executed three portfolio sales in last four years, selling stakes in over 30 funds and making more than $1 billion in proceeds.
Secondaries were the second-best performing strategy for SBA after distressed/turnaround, delivering a 16.2 percent internal rate of return from inception to 31 December, according to the materials. This was higher than the SI Cambridge Benchmark for secondaries which delivered a 15.6 percent IRR.
Lexington Partners accounts for the largest percentage by net asset value of SBA’s secondaries portfolio at 47 percent, followed by Ardian at 32 percent and W Capital Partners at 7 percent, according to the documents.
SBA manages funds on behalf of the Florida Retirement System (FRS) Pension Plan, Local Government Surplus Trust Fund, Florida Hurricane Catastrophe Fund, Division of Bond Finance, Lawton Chile Endowment Fund and Florida Department of Lottery, according to PEI Research & Analytics.