Massachusetts Pension Reserves Investment Management’s investment committee approved a policy change granting its staff increased flexibility when considering continuation funds.
Continuation funds have become a major part of the private equity landscape in recent years, particularly as GPs struggle to find favourable valuations in a difficult exit environment. Many LPs – especially public pension systems – find it difficult to invest in a continuation fund due to their rapid approval timelines.
MassPRIM’s investment committee approved a new policy recommended by its staff that delegates authority to the system’s executive director and CIO to approve commitments to continuation funds on a case-by-case basis. The measure was approved at a 14 November investment committee meeting.
Affiliate title Buyouts reviewed documents outlining the proposed policy. MassPRIM’s full board must approve the policy change before it becomes official.
The proposed policy would address MassPRIM’s potential commitments to continuation funds that require the system to contribute additional capital, according to board documents.
LPs typically have 20 business days to decide whether to enter a continuation fund or sell their existing interests, MassPRIM said. The quick timeline has prevented the system – along with many other LPs – from investing in continuation funds and realising their potential rewards.
According to board documents, MassPRIM has evaluated 33 continuation funds since 2019.
The system expects commitments to continuation funds to be less than $100 million per calendar year, according to board documents. These investments will count against MassPrim’s annual co-investment budget.
The system can allocate up to 40 percent of its annual private equity commitments to co-investments, board documents said.