LP Insight: Connecticut approves private equity strategic pacing plan

The US pension plans to quadruple its exposure to European GPs and will implement a co-investment programme, May documents show.

Institution: Connecticut Retirement Plans and Trust Funds
Headquarters: Hartford, US
AUM: $32.30 billion
Allocation to private equity: 7.0%

Connecticut Retirement Plans and Trust Funds intends to diversify its investments by committing to more European managers, according to materials from the pension’s investment advisory committee meeting in May.

The US pension’s long-term goal is to increase its allocation to European investments to 20 percent from 5 percent of its private equity portfolio.

Connecticut also plans to use various strategies, from commingled fund investments, secondaries and co-investments, to reach its long-term private equity target allocation of 10 percent, the documents show.

The pension plans to make $775 million in private equity commitments to core strategies across the 2021 fiscal year to bridge the gap between its current and target exposure to the asset class – a $200 million increase on commitments made in FY2020. Core private equity strategies include buyout, growth equity and distressed investments and non-core private equity comprises its venture capital allocation.

To ensure long-term alignment of actual and target allocations to private equity, Connecticut intends to scale up its commitments to the asset class. The market value of private equity commitments is anticipated to reach $900 million annually by FY2026, according to the documents.

Connecticut also plans to boost its private equity exposure through the implementation of an effective co-investment programme. The pension believes co-investments can offer greater net returns for its private equity portfolio and will strengthen core manager relationships.

To further broaden its portfolio offering, Connecticut plans to issue an exploratory request for proposal for new secondaries managers through its private equity advisory firm StepStone.

The pension also intends to commit to late-stage venture/growth managers to ensure its non-core private equity portfolio continues to generate positive returns as the pension develops its private equity offering. In the long run, its venture capital exposure is expected to decrease.

The portfolio breakdown in five years’ time is envisaged to be:

Connecticut’s private equity programme is headed by Mark Evans, principal investment officer, who has worked at the pension for almost three years. Connecticut has committed to funds managed by Hg, Clearlake Capital Group and HarbourVest Partners, among other managers, in 2020.