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Top US Public Pension Funds to Develop Separately Managed Accounts

by Philippe Alteirac

  • 21 Feb 2012
  • PE

California Public Employees’ Retirement System (CalPERS) and California State Teachers' Retirement System (CalSTRS), two of the largest public pension funds in the US, are actively planning to focus their attentions towards developing some of their private equity exposure through separately managed accounts. Over recent months, other large US public pension funds such as New Jersey State Investment Council (NJSIC) and Teacher Retirement System of Texas (TRS) have taken also steps towards developing separately managed accounts. New Jersey State Investment Council recently committed USD 1.5 billion to four opportunistic separate accounts with the Blackstone Group.

Separately managed accounts have recently become prominent amongst large institutional investors, in particular US public pension funds, as they present different advantages to traditional private equity fund investments. Through these accounts managed by the general partner, there will be the probability of having more preferable terms such as lower management fees and increased transparency. Another advantage of developing separately managed accounts is having the possibility of creating customised investment strategies in order to address particular portfolio preferences or to gain exposure to certain investment opportunities.

Preqin currently tracks 3,795 LPs that are actively investing in private equity funds on Investor Intelligence, of which 261 are US-based public pension funds. CalPERS and CalSTRS are the two largest US public pension funds by their current allocation to private equity, with allocations of USD 34.6 billion and USD 21.3 billion respectively. Combined, these two public pension funds account for 21% of aggregate capital currently allocated to private equity by all US public pension funds investing in the asset class.

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