Private equity drives strong performance at Florida SBA

The asset class returned more than 18% in the last year, but was the only one that failed to outperform its benchmark.

Despite being the second-highest performing asset class for Florida State Board of Administration, private equity was the only strategy that failed to outperform its benchmark in the 12 months to 30 June.

SBA’s private equity portfolio returned 18.27 percent for the period against a benchmark of 22.06 percent. The portfolio only outperformed its benchmark on a three-year basis, returning 12.9 percent against a benchmark of 7.94 percent.

According to its performance report, SBA’s private equity benchmark is the MSCI All Country World Investable Market Index, in dollar terms, net of withholding taxes on non-resident institutional investors, adjusted to reflect the provisions of the Protecting Florida’s Investments Act, plus a fixed premium return of 300 basis points per annum.

The public pension fund, whose net assets reached $153.6 billion from $141.3 billion at 30 June 2016, delivered a total return of 13.77 percent for the fiscal year, against a benchmark of 12.96 percent. Its current private equity exposure is 6.4 percent against a target allocation of 6 percent.

In an emailed statement, SBA executive director and chief investment officer Ash Williams said the pension plan is “always pleased to post double digit returns, and this year is no exception,” attributing SBA’s long-term performance to “prudence, patience, and diversification”.

“However, as always, our focus has always been on the long-term sustainability of the plan, and we must acknowledge current dynamics in the financial markets moderating projected future returns.”

SBA is one of three limited partners that have chosen to commit to Apollo Investment Fund IX, CVC Capital Partners VII and KKR Asian Fund III – the largest-ever global private equity fund, the largest-ever European fund, and the largest-ever Asia-focused fund respectively – which have amassed more than $50 billion in limited partner commitments between them, as reported by Private Equity International.

SBA committed $200 million to Apollo IX, $90 million to CVC VII, and $150 million to KKR Asian Fund III, according to PEI data.

SBA’s strongest asset class was global equity, which delivered a 19.6 percent return. Its current allocation to global equity is 57.8 percent.