Florida hikes private equity target to 5%

The Florida State Board of Administration has increased its target allocation to private equity from 3.5 percent to 5 percent, and bumped its allocation to debt-related funds to 3 percent.

Florida SBA, which manages a total $135 billion of assets under management, had a goal of committing between $1.5 billion and $2 billion in fiscal 2010 to private equity funds. The pension’s fiscal year ends 30 June.

The board also slightly hiked its target allocation for real estate to 7 percent from 6.4 percent.

Florida has put much more focus on what it calls “strategic investments”, which include debt-related funds like those managed by Oaktree Capital Management, as well as infrastructure, timber and hedge funds.

The pension increased the allocation target to strategic funds from 1.8 percent to 11 percent. Within strategic allocations, Florida SBA for the first time carved out space for an up to 2 percent allocation to infrastructure.

Florida has made a rash of commitments to debt funds since March, committing $260 million to funds managed by Oaktree, ABRY, Varde, and is negotiating commitments to GSO and Audax.

Florida's private equity consultant, Hamilton Lane, provided the board a review of the programme. Florida's private equity programme was launched in 1988, and has a 6.5 percent internal rate of return since inception. The portfolio has $4.5 billion in unfunded commitments.

Last year, according to Hamilton Lane, Florida made $1.2 billion in private equity commitments, and received $450 million in distributions.

The lowest performing fund in 2009 in Florida's portfolio is Centre Capital Partners II, a vintage 1995 fund, which had a -49 percent IRR for the year. The best performing fund in 2009 was the pension's Co-Investment Partners II, established in 2002, witha a 65.9 percent IRR.