The secondaries portfolio has made the second-strongest contribution to the Florida State Board of Administration’s private equity performance since inception, according to documents from an investment council meeting.
Secondaries investments have generated a net internal rate of return of 15.8 percent since inception, compared with 10.4 percent for venture capital and 11.6 percent for buyouts. The strongest performer has been the distressed and turnaround portfolio, which achieved an internal rate of return of 20.5 percent.
Secondaries have also performed strongly on a public market equivalent basis, beating the MSCI benchmark by 8 percent. The secondaries portfolio has produced a total value to paid-in multiple of 1.5x and a distributed to paid-in capital multiple of 1.0x, the documents reveal.
Although Florida SBA’s secondaries portfolio has exceeded the Cambridge Associates Benchmark across all time periods, its recent performance has been weaker compared with other strategies in the portfolio.
Over the past year secondaries have generated an IRR of 6.7 percent, compared with 16.3 percent for buyout and 19.4 percent for distressed and turnaround. Venture capital saw the weakest performance, returning 2 percent. A similar picture holds over a three-year period, secondaries returning 8.5 percent compared with 12 percent for distressed, 13.5 percent for venture capital and 13.6 percent for buyout.
Florida SBA’s secondaries portfolio is split 57 percent to 43 percent between Lexington Partners and Ardian, the documents reveal.
The pension fund has also carried out four portfolio sales in the last four years, realising $1.5 billion.
The documents also outline its estimated commitment pacing over the next three fiscal years. The fund expects to commit nothing to secondaries in the 2017-18 fiscal year, $400 million in 2018-19 and $100 million in 2019-20, adding up to $500 million over the period. Its total private equity commitments are estimated to come to $5.284 billion over that three-year period, with buyouts accounting for 33 percent of the total.
Florida SBA manages $180 billion in assets and has committed more than $1 billion to dedicated secondaries funds since 2010, according to PEI data.