Pennsylvania allocates $50m to private equity

The state employees’ pension system will allocate $25 million each to two funds.  

The Pennsylvania State Employees’ Retirement System is allocating $50 million to private equity as part of its recently revised alternatives allocation plan, according to meeting documents.

PSERS’ has approved an allocation of up to $25 million to JMI Equity Fund VIII. JMI Equity is a Baltimore-based private equity firm focused on software and business services companies. Fund VIII focuses on minority equity and buyout investments in middle market software and technology-enabled services companies throughout North America.

In May 2014, the firm received a $50 million commitment towards its eighth flagship vehicle which has an undisclosed target size, according to Private Equity International’s research and analytics division. 

The pension system has also approved a commitment of up to $25 million to Meritech Capital Partners Fund V. Meritech is a partnership fund between Accel Partners, Oak Investment Partners, Redpoint Ventures and Worldview Technology Partners. The firm provides late-stage venture capital to information and medical technology companies. Fund V is Meritech’s latest fund with an undisclosed target. The firm closed its Fund IV on $425 million in April 2011.

PSERS’ achieved an overall portfolio return of 2.7 percent net-of-fees for the first quarter, which added approximately $726 million to the fund. Year-to-date returns are 12.5 percent net of fees. Alternative investments accounted for a 6.2 percent return in the first quarter.

In May, PSERS’ announced that it would be modifying alternative assets allocations to include mezzanine, distressed debt and secondaries strategies. The pension system also increased its 10-year target allocation for alternative investments from 14 percent to 15 percent, PEI reported at the time. The alternative allocation is comprised of private equity, venture capital and special situations which include mezzanine, distressed and secondaries.

The meeting documents note that the new allocations are part of the system’s newly refined approach to alternative investments – which includes making fewer, larger commitments to GPs. This is a growing trend among pension systems – PEI reported on similar moves underway at CalPERS last week. PSERS’ is also working through more uniform pacing of investments, and customizing investment vehicles to achieve long-term portfolio objectives.