It’s no secret that some US public pensions have been thinking carefully about their allocations to Chinese private equity in recent years. Houston Firefighters’ Relief and Retirement Fund is among them. Speaking at SuperReturn Asia in Singapore this morning, chief investment officer Ajit Singh told delegates that the $5.2 billion pension was reallocating capital towards other markets in the region as it seeks greater clarity about the regulatory and travel environment.
“Based on the latest developments, I am slowing down the new capital deployment [in China],” Singh said. “Not because I feel that the investment case [has changed]. It is just that at this time I’m not sure about what kind of policy risk I can get, so I’m waiting for things to get cleared up a little bit.” Singh’s view chimes with what fundraisers in the region have been warning for some time – that Chinese PE funds are becoming harder to raise.
“Ninety percent of LPs we’re talking to at the moment are saying they’ve put China on pause,” Niklas Amundsson, a Hong Kong-based partner at placement firm Monument Group, told Private Equity International in December.
This isn’t to say that China fundraising is a complete write-off. Indeed, most LPs with exposure to the market are simply becoming more selective and raising the bar when it comes to manager selection. Last month, we shared this list of four things that investors are looking for in China this year.
While we’re on the subject…
Sticking with Asia-Pacific, Hamilton Lane this morning said it had appointed Kerrine Koh as head of Southeast Asia. Koh previously spent 12 years at BlackRock – most recently, as head of alternatives distribution for Southeast Asia. She’ll sit within the client solutions group, leading business development efforts and managing existing client relationships in the region. Her appointment coincides with a balance sheet investment into StashAway, a Singapore-based digital wealth manager that PEI profiled back in March. This is the latest in a series of tech-based investments for Hamilton Lane, which has previously participated in funding rounds for tokenisation pioneer ADDX and fundraising giant iCapital, among others.
PAG’s sustainability play
Pan-Asian PE giant PAG has become the latest to embrace sustainable finance. The Hong Kong-headquartered firm said this morning it has established the first sustainable loan “to be supported by a sustainability-linked financing framework in the Asian private equity market”. The three-year subscription facility is backed by unfunded capital commitments from a diversified group of “blue-chip investors” and will help fund its PE strategy. The interest rate will be linked to sustainability performance targets and will drop based upon the achievement of specific ESG investments, which are verified by an independent third party. PAG’s move echoes that of peer Baring Private Equity Asia, which secured Asia’s first ESG-linked credit facility last year. PAG, which had been planning an IPO earlier this year, is reportedly seeking $9 billion for its latest flagship.
San Diego’s top priority
It’s common these days for US public pensions to find themselves grossly overallocated to PE. San Diego County Employees’ Retirement Association, on the other hand, is in the enviable position of having plenty of room to manoeuvre. The $14.6 billion pension’s investment staff’s top priority is building out its PE portfolio, our colleagues at Buyouts report this month (registration required). San Diego stands out for having a relatively low (6 percent) target to PE in its portfolio, and is currently underweight at only 4 percent.
At San Diego County’s board meeting on 15 September, Mike Comstock, a partner at consultant Aon, said the system’s results over time could have been stronger with an increased allocation to PE. San Diego County’s trust fund fell in value by 9.4 percent over the past year, placing it in the 66th percentile of the 63 public funds considered to be its peer group. During the same time period, PE returned 14.2 percent and private real assets returned 18.8 percent. “The marching orders have been to partner with solid firms and to feel comfortable with the process,” Comstock said.
LP meetings. Here are some LP meetings to watch out for this week.
- Iowa Public Employees’ Retirement System
- Chicago Firemen Annuity & Benefit Fund
- Colorado Public Employees’ Retirement Association
- California Public Employees’ Retirement System
- Missouri State Employees Retirement System (MOSERS)
- Arizona Public Safety Personnel Retirement System
- University of California Regents Endowment Fund
- Sonoma County Employees’ Retirement Association
Today’s letter was prepared by Alex Lynn.