Florida SBA becomes ‘more aggressive’ on secondaries purchases

The pension system, which has a separate account to invest in LP stakes, is expecting a buyers' market and an uptick in secondaries dealflow.

Florida State Board of Administration has been upping its bidding activity in secondaries opportunities on the back of setting up a separate account to buy fund stakes via an external consultant.

At the $238 billion pension system’s 19 September investment advisory council meeting, senior investment officer for private equity John Bradley identified secondaries purchases as the main way the pension has been taking advantage of market conditions favouring LPs.

“We’ve been a little more aggressive in the secondary market over the last year,” Bradley said. “We’ve been very active bidding on things in the secondary market, mainly energy funds.”

The pension has been proactively sourcing opportunities in funds by managers it doesn’t have a current relationship with, or in vehicles that previously haven’t let investors in across both venture capital and buyouts, Bradley said.

“We’ve been successful in a number of instances accessing new funds and rolling the portfolio over today into what we think is going to be a better, high-quality portfolio.”

Florida SBA set up a $100 million opportunistic separately managed account with Aegon Asset Management in 2021 to invest in smaller and more sector-specific opportunities. Aegon has discretion over investments; the SBA has a veto right and works “collaboratively and closely” with its manager when underwriting transactions, Bradley told Secondaries Investor in January.

The SMA primarily focuses on LP interests and can back GP-led transactions as well, Bradley told Secondaries Investor at the time.

Secondaries was the pension’s fourth-best performing private equity sub-strategy as of 31 March with a 15.5 percent return, according to materials prepared for the 19 September meeting. It beat its PME benchmark of 8.2 percent as of the same date.

Sovereign wealth funds, consultants and advisers accounted for around 9 percent of all buyers globally last year, according to a May report by Elm Capital. Secondaries funds and funds of funds accounted for the lion’s share of buyside activity at 77 percent, according to Elm, which did not list pension funds as a standalone buyer type in its report.

At Florida SBA’s prior IAC meeting in June, Bradley said he expected an uptick in buyer opportunities in the year ahead.

“It does feel like activity and dealflow is returning to the secondary market,” he said. “We think in the next 12 months we will absolutely see an increase in secondary supply, which means it feels like we’re going to be entering into a buyers’ market and it might be a good time to buy.”