Secondaries comes in fifth for Florida SBA

The pension's secondaries portfolio has been outperformed by buyouts, distressed and growth equity over the past year but continues to beat its public market benchmark.

Secondaries returned 12 percent over the past year, but that was only enough to make it Florida State Board of Administration‘s fifth-best-performing private equity asset class, according to the pension fund’s September meeting documents.

The asset class finished behind non-US buyouts, which grew 12.1 percent; US growth equity, which grew 17.2 percent; distressed/turnaround, which grew 20.5 percent; and US buyouts, which topped the list with 23 percent growth over the last year.

US venture capital and non-US growth equity came in below secondaries, with returns of 7.6 percent and 10.5 percent over the period, respectively.

Despite this, since inception the asset class is the pension’s second-best performer, returning 15.8 percent compared with distressed/turnaround’s 20.5 percent. Secondaries have outstripped the MSCI public market benchmark by 800 basis points over the period, achieving a distributed-to-paid-in ratio of 1x and a total-value-to-paid-in of 1.5x.

Florida SBA’s secondaries portfolio is split 57 percent to 43 percent between Lexington Partners and Ardian, Secondaries Investor reported in June.

Florida SBA’s private equity portfolio has $9.8 billion in net asset value and additional $6.3 billion in unfunded commitments. It has 162 active funds managed by 64 GPs. Secondary investments make up around 5 percent of the portfolio, according to the meeting documents.

According to senior investment officer John Bradley, Florida SBA is increasing its exposure to the small end of the private equity market and sector specialists, while reducing its exposure to the largest buyout funds. It has also been a willing seller.

“We’ve also been very active in the secondary market and strategic in using that market to help facilitate some of these portfolio transitions,” he added, “as well as realise [sic] some liquidity at what we think are very attractive valuations.”