The State of Wisconsin Investment Board (SWIB) is planning to commit $1.5 billion to private equity in 2016.
The $83 billion pension fund plans to make commitments of $25-150 million each to 15 to 20 new private equity funds, and $10-40 million in five to eight co-investments. The SWIB will be selective in committing to new funds, focusing on the small and mid-market GPs, according to a report from its 13 April board meeting.
However, within the private equity portfolio, the SWIB is planning to cut several existing private equity partnerships, bringing the portion of capital allocated to existing general partners to 85 percent of the portfolio. It added that there are no plans to make secondary sales.
At the end of 2015, its private equity portfolio was invested 71 percent in buyout funds, 2 percent in secondaries funds and 2 percent in co-investments.
Within buyouts, mega buyouts accounted for 20 percent of the portfolio, which the SWIB aims to bring down to 15 percent in the long term. It is seeking to raise its exposure to co-investments to 7.5 percent over the long-term.
Private equity represented 6.6 percent, or $5.5 billion, of the pensions entire portfolio, and private equity co-investment 0.2 percent, or $150 million, of its total exposure, as of 29 February.
SWIB’s co-investment program launched on 1 January 2014 has evaluated 113 opportunities from 69 different GPs, the document said. Of those, it declined 96 deals and moved 17 to full due diligence.
It has so far committed $183 million to 11 co-investments with eight different GPs, according to the document. The co-investment portfolio’s net internal rate of return (IRR) as of 31 December was 14.7 percent, above the average 13.2 percent net IRR for the overall private equity. The only other sub-strategies within private equity that beat that average net IRR were mid-market buyouts, which returned 21.9 percent, and large buyouts, which returned 18.3 percent.
The private equity portfolio beat its benchmark for all time periods, returning 10.6 percent for one year, 13.8 percent for three years, 13.1 percent for five years and 11.4 percent for 10 years leading up to 29 February.
In secondaries, it transferred 100 percent of its interest in Charterhouse Capital Partners (CCP) VII and CCP VIII to Hamilton Lane, Northwestern Mutual Life Insurance Company, and Pomona Capital in October, as reported by Secondaries Investor.
In the first quarter of calendar year 2016, the SWIB committed $483 million to eight different private equity funds, including $110 million to Advent International Global Private Equity VIII, $50 million to Wind Point Partners VIII and $23 million to co-investing, the document said.
A spokeswoman was not available to comment.