Development of Emerging Manager Programmes in the US

by Philippe Alteirac

  • 15 May 2012
  • PE

As many LPs look to invest with experienced managers that have strong track records or with managers they have worked with previously, emerging managers have historically found it more difficult to secure commitments from investors. This is particularly true as the financial markets remain turbulent. However, a number of LPs are increasingly looking to invest with emerging managers and develop specific programs related to this. Preqin’s 2012 Global Private Equity report reveals that 45% of LPs will consider investing in first-time funds (including spin-offs) over the course of 2012.

Massachusetts Pension Reserves Investment Management Board (MassPRIM) is one LP that is looking to develop an emerging manager program. MassPRIM has issued an RFP for firms offering emerging manager investment services, whereby the successful firm will be expected to develop, establish and manage an investment portfolio of emerging managers. In this instance, MassPRIM describes emerging managers as fund managers who have a shorter track record than more experienced managers, have total assets under management of less than USD 2 billion or managers who have a strong participation from women and minorities.

Teacher Retirement System of Texas (TRS) is another LP that is looking to develop its emerging manager program. It has made a good-faith effort to develop its program to invest with qualified emerging managers, which it describes as newer, independent firms that have total assets under management of less than USD 3 billion, or have a performance track record as a firm of less than five years. In 2011, it committed USD 100 million to private equity emerging managers, and plans to continue to allocate capital to this program over the course of 2012.
Another North American LP that has expressed their interest in developing an emerging manager program is California Public Employees’ Retirement System (CalPERS), which recently committed USD 100 million to fund of funds vehicle, Credit Suisse-Domestic Emerging Manager.
It is evident that LPs are continuing to seek diversified investment portfolios, as demonstrated by the number of investors looking to develop emerging manager programs within their private equity portfolios at present.

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