The secondaries portfolio of Florida State Board of Administration is the pension’s second-best performing strategy, even as it prepares for a world of lower returns.
Secondaries investments had generated a since-inception internal rate of return of 16 percent as of 30 June, according to documents prepared for the pension’s 10 December investment advisory council meeting. The only strategy to achieve better returns was distressed, which returned 20.2 percent.
The Cambridge Associates secondaries benchmark was 14.6 percent as of end-June, meaning the pension’s portfolio cleared it by 1.4 percentage points. The benchmark for the whole private equity asset class is 11.5 percent.
Florida SBA allocates 10 percent of its private equity assets to secondaries and has actual exposure of 6 percent, the documents note.
At the pension’s June investment committee meeting, senior investment officer of strategic investments and private equity John Bradley said he expected returns from the strategy to decline in line with increased dry powder.
“We’ve found it’s an area where there’s much less differentiation between the different firms. And I think today it’s an area where there has been so much money pouring in that it’s a much more difficult return to create for the secondary environment,” he said, in comments reported by Secondaries Investor.
In June, Florida made a $100 million commitment to Landmark Real Estate Partners VIII, its first secondaries commitment with a firm that is not Ardian or Lexington. The commitment was made by its real estate team and is not connected with its private equity secondaries portfolio.
Florida SBA has $194.1 billion in assets, with private equity accounting for 7.1 percent of the total, according to PEI data.
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