Arizona plans $600m in PE commitments for 2014

The retirement system’s private equity portfolio includes commitments to mezzanine and distressed debt. 

The Arizona State Retirement System (AZSRS) plans to commit approximately $600 million to private equity in 2014, according to documents released by the retirement system.

Arizona committed $515 million across nine 2013 vintage funds. Communications manager David Cannella had not responded to a request for comment at press time.

The $30.6 billion retirement system’s private equity policy includes a mandate for mezzanine and distressed debt. Approximately 17 percent of Arizona’s private equity commitments are dedicated to those strategies, distressed having been an area of particular interest in recent years.

“In the past few years, we have placed significant capital in distressed style strategies as the US emerges from the great recession,” according to a private equity program review included in 21 April meeting materials. “Energy is a current focus with tremendous demand for capital in development and infrastructure.”

The retirement system has placed less of an emphasis on venture capital, take-private leveraged buyouts and strategies with multiple exit routes.

Despite Arizona’s plans to invest as much as $600 million to the asset class this year, private equity has generally undershot performance benchmarks set by the retirement system. The portfolio had generated only 11.87 percent since inception through 30 September, well below the 15.83 percent generated by the Russell 2000, a small-cap equity index.

The retirement system has a 7 percent allocation to private equity. Net asset value of its private equity portfolio stood at $1.8 billion through 30 September.