The Virginia Retirement System took a more active role with its private equity investment strategy in 2011, hitting the secondary market as a buyer for the first time.
The $51 billion retirement system purchased three commitments for a little less than $100 million, according to retirement system documents.
A presentation reviewing the retirement system’s private equity portfolio indicates that Virginia plans to continue engaging the secondary market in 2012, but only “when we have an edge” to “increase exposure to specific managers”. Retirement system staff has not specified whether it will enter the market as a seller, stating only that they will engage the secondary market opportunistically, a spokesperson for the retirement system said.
Virginia’s largest secondary commitment went to Natural Gas Partners ninth fund, a $4 billion 2007 vintage. Virginia acquired an $80 million secondary commitment to that fund, which was generating a negative 0.37 internal rate of return as of 28 February, 2011, according to documents from the University of Texas Investment Management Company.
The retirement system also purchased an $18 million commitment to HarbourVest Partners’ 2007 direct investment fund as well as a $1.5 million commitment to Novak Biddle Venture Partners, according to retirement system documents.
In addition to secondaries, the presentation also indicates the Virginia will study the development of a co-investment programme in 2012.
Virginia made $216 million in commitments to private equity funds in 2011, including commitments to Energy Spectrum, Abry Partners, Quadriga Capital and TSG Consumer Partners. The retirement system also made an unspecified $75 million commitment to Credit Suisse.
As of December, Virginia had $4.6 billion, or 9 percent of its assets, committed to the asset class.
Secondary deal volume hit a record high again in 2011. Private equity intermediary NYPPEX and broker Cogent Partners have both released studies placing overall deal volume at more than $25 billion.
“While most public pensions initiated transactions to achieve portfolio rebalancing objectives, financial institutions in North America, Europe and Asia divested large and diverse portfolios in response to mounting regulatory pressures,” said Brian Mooney, managing director with Cogent. “We expect Dodd-Frank, Basel III and Solvency II will continue to drive considerable near-term transaction activity by banks and insurance companies.”