Florida State Board of Administration set up an opportunistic separately managed account with Aegon Asset Management in 2021 to invest in smaller and sector-specific opportunities.
As of June, the $217.5 billion state pension’s secondaries portfolio had outperformed its benchmark over all time horizons and had outperformed public markets by 700 basis points.
John Bradley, senior investment officer at Florida SBA, told Secondaries Investor details about the SMA and what types of transactions it hopes to back.
Is this a discretionary or non-discretionary account?
Aegon Asset Management has discretion but we have a veto right. We work collaboratively and closely with Aegon AM when underwriting transactions to form a view.
How do you go about identifying which secondaries opportunities you’d like to pursue?
We source through our [Florida SBA’s and Aegon AM’s] current roster of private equity funds who have LPs who want to sell, advisers and our network of relationships. We also see dealflow from secondary fund relationships as many transactions require multiple buyers.
Is Aegon the sole manager responsible for executing on investments from the account, or is there another manager who also helps with investing the account? Why did you select Aegon?
They are the sole manager and this is their first account like this, but they’ve been doing secondary transactions for years on their own. We chose Aegon because we were looking for a firm with experience pursuing secondary transactions, openness to a separate account structure and a willingness to be collaborative.
Does the account only acquire LP stakes, or does it also back GP-led deals? What was the rationale for this?
The fund can do both secondary LP interests and GP-led transactions, but the primary focus is LP interests. The mandate is flexible, including both secondary and direct co-investment opportunities, and allows our teams to capitalise on whatever part of the market is most attractive.
What sort of net returns are you targeting with the account?
It depends on the risk profile of the transaction. In general, lower risk transactions would be high-teens/low 20s and the higher risk transactions would be 25 percent-plus. Net returns to date are early but have performed ahead of our targets to-date.
John Bradley is senior investment officer at the Florida State Board of Administration where he has been for almost 10 years. He has been involved in private equity for more than two decades.