State of Wisconsin Investment Board’s use of the secondaries market to alter its investment strategy appears to be paying off, documents prepared for its latest board of trustees meeting show.
The Madison-headquartered pension’s private equity portfolio doubled in the nine years to March 2019, even as the pension system changed its focus to small buyouts and reduced its number of large buyouts relationships.
The overall performance improved by 520 basis points, and funds from vintage 2010 onwards generated returns of 15.4 percent, compared with pre-2010 funds’ returns of 10.2 percent in the core private equity portfolio, according to documents for the 10 September meeting. The returns are as of 31 March.
Commitments to fewer managers and the sale of stakes in non-core managers on the secondaries market led to mega and large buyout fund exposure dropping from 53.4 percent to 38 percent of the core PE portfolio during the nine-year period, the documents noted. The portfolio sales also helped increase the commitment pace.
Pension funds and sovereign wealth funds accounted for 23 percent of deals by transaction volume in the first half of this year, according to advisor Greenhill.
In 2010, the $122.22 billion pension system began repositioning its $5.9 billion core private equity portfolio, which accounts for almost 70 percent of its $8.4 billion total private equity portfolio. The portfolio includes buyouts, growth equity and special situations funds.
The pension system will continue to increase its exposure to small buyouts, defined as funds below $1 billion, and selectively reposition its distressed and credit exposure for the next default cycle, SWIB communications manager Vicki Hearing confirmed to sister publication Private Equity International.