South Carolina pension to double growth equity exposure

The $32bn pension plans to allocate as much as 20% of its private equity portfolio to growth and mid-market-focused GPs.

South Carolina Retirement System Investment Commission plans to double its allocation to growth equity investments and trim its buyouts exposure, Private Equity International has learned.

The $32 billion US pension’s growth equity exposure stands at around 5-10 percent of its private equity portfolio; it is aiming to double that figure in the next five years, according to chief investment officer, Geoffrey Berg.

Geoffrey Berg, South Carolina Retirement System Investment Commission
Geoffrey Berg

“From a strategy perspective, we are heavily skewed towards buyouts, but we have been building more of a growth allocation in our portfolio. Our focus is also coming down from mega buyouts into the mid-market space,” Berg told PEI.

He noted the pension will do this “thoughtfully and patiently” but does not expect it to “meaningfully change the geographic diversification of the programme.”

The Columbia-based pension has a 9 percent target for private equity, which stands at 7.5-8 percent, Berg said. Buyouts make up roughly 70 percent of its PE portfolio. RSIC has mainly backed funds managed by US GPs and has some exposure to Asia-Pacific and Europe. Its latest capital commitments include $75 million each to TA Associates’ 13th flagship fund and Providence Equity Partners’ fourth strategic growth fund, as well as $150 million to Hellman & Friedman’s ninth buyout fund, according to PEI data.

“Everything is getting fairly crowded and there are a lot of really talented managers in the mega buyout space. We will continue to allocate to this area of the market with select partners and expect it to continue to be a great source of co-investment opportunity. But we also need to be focusing our time and resources moving down market to diversify,” Berg said.

He noted that with competition increasing for buyout deals, finding opportunities down market will generate better returns for the pension.

“For the first 10 years of our programme, I think it was challenging to get the right relationships, to get capital out with those firms in a thoughtful way. Although that’s no longer a challenge for us and we have great relationships in that space, we need to be coming down market to find attractive investment opportunities.”

RSIC’s private equity portfolio generated 8.47 percent annualised returns as of end-June, according to its latest quarterly report. Three-year and five-year annualised returns delivered 12.81 percent and 10.30 percent, respectively.

LP appetite for growth investing has been on the rise in the last year. Capital raising for the strategy reached $51 billion in the first half of this year, a more than 70 percent increase from the same period in the previous year, according to PEI’s half-year fundraising report.