San Jose’s non-commitments

Secondaries fund managers might be forgiven for getting excited about the San Jose Police and Fire pension system committing more cash to their strategies this year.

The California pension’s 2014 private equity plan had earmarked $100 million for commitments to two to four secondaries funds before the end of the year, largely to help it backfill missing vintage years in its portfolio from periods of inactivity.

But its now well into the fourth quarter and the pension has only committed $15 million to one manager, direct secondaries specialist Industry Ventures.

It’s hard to know exactly why San Jose Police and Fire hasn’t committed secondaries-focused capital as planned (it declined to comment), but it’s a good reminder that not all limited partners always deploy their full allocations as planned. And that the roughly 40 secondaries funds in market must still work very hard to attract commitments and differentiate their strategies to potential LPs – as even those with secondaries allocations aren’t necessarily obliged to spend them (whatever the reason).

In San Jose’s case, it now plans to commit between $40 million and $60 million to secondaries funds with a US or European focus before June 2015, and in the long-term it expects to allocate 15 percent of its $258 million private equity programme to secondaries. That’s still great news for the secondaries market – but judging by the pension’s (in)activity this year, GPs might not want to hold their breath, either.