Schwartz: Operational focus is key

Limited partners are increasingly mindful of expected increased default rates and PE managers with operational expertise, the head of TIAA-CREF’s alternatives division, Sheryl Schwartz, recently told sister publication Private Equity International.

General partners and their investors will this year be more focussed on firms and funds that can truly add value during market downturns or dislocation, according to Sheryl Schwartz, who has led TIAA-CREF’s alternatives division since its launch in 1997.

Sheryl Schwartz

“There’s a real focus on operations and the expected increased default rates,” Schwartz recently told sister magazine Private Equity International. “I think there’s a major flight to quality.”

The $437 (€297 billion) billion private retirement system’s buyout fund commitments lean much more toward turnaround funds this year, she said.

Separately, she noted: “We’re seeing a lot of distressed opportunities this year. And both last year and this year we materially increased the percentage we’re investing in distressed debt and equity funds.”

Private Equity

Historically, TIAA-CREF had earmarked 10 to 15 percent of its fund commitments to distressed debt and equity funds, but last year it was 25 percent of the approximately $2 billion it made in private equity fund commitments.

This year, the group is likely to allocate the same percentage to distressed investment strategies, and is set to match or increase last year’s total commitments, which equaled roughly $2.6 billion including co-investments and timber investments.

An article about the evolution of TIAA-CREF’s $11.3 billion alternatives programme, from experiment to powerful limited partner, is featured in the current issue of Private Equity International.