Maine doubles private equity target

The $11bn retirement system will focus on expanding existing relationships with private equity fund managers as it increases its target allocation from 5% to 10%.

The Maine Public Employees Retirement System increased its total target allocation to private equity from 5 percent to 10 percent, chief investment officer Andrew Sawyer told Private Equity International. 

The $11 billion retirement system will ratchet up its allocation to the 10 percent target over the next three to five years, he said. 

“We had spent almost a year studying our risk position and our asset allocation, and it was the right thing to do,” Sawyer said. “We have lowered our public equity [allocation] and increased our private equity. We think we have substantial ability to invest in illiquid investments and [that] we will get paid to do so.”

Although the new allocation doubles the retirement system’s previous target, Sawyer said that Maine PERS is unlikely to pursue many new relationships as it builds its portfolio. The retirement system’s portfolio under the new target will ultimately contain between 20 and 25 fund managers, he added. 

“We’ll more likely take bigger bites out of the deals we do … re-ups with the same general partners,” he said. “It’s getting tougher and tougher to add new managers to the platform. We know most of the people we like and want to work with.”

As of 30 September, Maine’s actual allocation to the asset class was at 1.2 percent across approximately 18 managers, well below the 5 percent target. Sawyer attributed the system’s low allocation to a dearth of investment opportunities since entering the asset class in 2008, largely due to firms’ limited fundraising following the economic crisis in 2009 and the fact that “a lot of people that were coming to market weren’t putting money in the ground.”

In addition to increasing its allocation to private equity, Maine PERS also boosted its infrastructure allocation from 5 percent to 10 percent and added a 5 percent real assets category that will include investments in agriculture, timber, mining, rare earth, metals and commodities.

Last year, Maine PERS invested $30 million in Kohlberg Kravis Roberts’ 11th North American fund. Other firms in the retirement system’s portfolio include The Blackstone Group, GTCR, Hellman & Friedman, The Carlyle Group and Oaktree Capital Management.