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North American Investors Planning to Increase Private Equity Commitment Pace – January 2014

by Raisah Yusuf

  • 14 Jan 2014
  • PE

A number of North America-based investors have announced plans to increase the pace at which they commit to private equity funds during 2014. This strategy is being implemented in an effort to reach their target allocations to the private equity asset class. 

Recent months have seen a number of North America-based investors increasing their commitment pace to private equity in response to being below their target allocations to the asset class. New Mexico State Investment Council announced in January of this year plans to increase the amount of capital it commits to private equity to $500mn over the next 12 months, and to $750mn over the next 18 months. Previously, the sovereign wealth fund had planned to allocate $450mn in commitments to private equity funds over the next 12 months, and $675mn over the next 18 months. New Mexico State Investment Council implemented the strategy after cash distributions from fund managers to the pension fund exceeded expectations, following strong exit markets in 2013.

Kansas Public Employees’ Retirement System is also planning to increase its private equity commitment pace. The pension fund usually allocates between $300mn and $350mn per year towards the asset class. Its private equity consultant, LP Capital Advisors, also advised the pension fund to increase its typical commitment size to between $50mn and $75mn per private equity vehicle in an effort to reach its target allocation by 2022. San Diego City Employees’ Retirement System has also announced plans to increase the pace of its private equity commitments, as well as that of its co-investments.

This is in contrast to 2012, which saw a number of investors above their target allocations, thus looking to slow the pace at which they commit to private equity. For example, Oregon State Treasury reduced the amount of capital it committed in 2012 to $2bn, as compared to $2.7bn which the pension fund committed in 2011. Ohio Public Employees’ Retirement System is another example of an institutional investor that was looking to slow its private equity commitment pace in 2012.

Despite these decreases among some US-based pension funds in 2012, a global investor survey carried out by Preqin in December 2013 showed that over a third (36%) of investors expected to commit more capital to private equity over the next 12 months than in 2013. Results also revealed that 71% of investors anticipated making their next commitment to private equity funds over the next 12 months, with 68% expecting to make their next commitment in H1 2014. 

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