The secondaries portfolio of Florida State Board of Administration is the pension’s second-best performing strategy since inception, according to documents prepared for the pension’s 19 March investment advisory council meeting.
Secondaries investments generated a since-inception internal rate of return of 15.9 percent as of 30 September, the documents reveal. The only strategy to achieve better returns was distressed, which returned 20.5 percent.
In terms of its ability to beat the benchmark, secondaries lagged all other strategies in Florida’s private equity portfolio. The Cambridge Associates secondaries benchmark was 14.8 percent as of end-September 2017, meaning the pension’s portfolio cleared it by 1.1 percentage points.
The pension’s distressed portfolio beat its benchmark by 10.5 percentage points, non-US growth equity by 4.4 percentage points and non-US buyout by 3.4 percentage points.
Cambridge’s benchmarks calculate the median return of the strategy net fees and expenses.
Secondaries has also underperformed over certain reference periods. Over a three-year period the portfolio returned 10.5 percent, with non-US growth equity the only weaker performer on 10 percent. Secondaries is also the pension’s weakest performer over 10 years, returning 8.9 percent against 11.2 percent for Florida SBA’s entire private equity portfolio.
The secondaries portfolio is split between Lexington Partners and Ardian, according to a list of the pension’s holdings in the documents.
It manages $209.7 billion in assets, according to the documents, with private equity accounting for 6.5 percent of the total.