San Francisco splits roles for PE and VC

The $16 billion San Francisco Employees’ Retirement System has reorganised the structure of its alternatives programme to better manage its large and growing number of manager relationships.

At a time when other public institutions are using the secondary market to trim down the number of managers in their portfolios, San Francisco Employees’ has split responsibilities for private equity/buyout and venture capital into two positions. Private equity is headed by senior investment officer Glen Schwartz. The venture capital senior slot has not yet been filled.

“The venture capital programme is at a size where having a dedicated person is critical,” said one person who is familiar with the pension system’s alternatives programme. San Francisco Employees’ alternatives programme is valued at about $2 billion, with about $500 million of that representing venture capital exposure.

The head of venture capital needs to be a person “who everybody likes”, the person said. Access to top tier venture firms is tough, as existing investors get first shot at re-investing with their favorite managers. However, building relationships among top-flight venture outfits is essential to building a quality venture programme, the person said.

“It requires an individual who can develop relationships and get organisations that don’t need any money to take [the system’s] money,” the person said.

Private equity managers, on the other hand, usually need to approach potential investors and ask for money. “It’s a different skill set,” the person said.

The two heads of the asset classes will report in to the overall head of private markets, who has supervision over private equity, venture capital and real estate. That position has been vacant for the past few years, but San Francisco has recently hired someone to lead private markets. The system is not disclosing who the individual is yet.

At the retirement board meeting this month, San Francisco Employees’ entered into two new relationships, committing $20 million to Thoma Bravo, which launched its 10th fund in September targeting $950 million, and between $10 million and $20 million to Bain Capital Ventures, the venture investing arm of parent organisation Bain Capital.

The system will likely spend about $350 million in new commitments across 12 to 16 different funds this year. San Francisco Employees’ has a 14 percent target allocation to private equity, with a cap of 18 percent and an actual allocation of 13.5 percent, as of 30 June, 2010,.

The retirement board also announced that Lindsey Adams had been named head of real estate. Adams, whose official title is senior portfolio manager, real estate, had been with the pension system for about three years, prior to which she worked as a vice president and portfolio manager at AMB Property Corporation.