The Allstate Corporation has launched its first private equity emerging manager program with $100 million to be invested over three years, according to Edgar Alvarado, the company’s head of real estate equity.
Alvarado will lead the emerging manager program, which will be integrated into Allstate’s existing private equity and private equity real estate fund commitment operations. Resources from those teams will be available to the emerging manager program.
Allstate has hired the Customized Fund Investment Group to administer the program. CFIG has long been part of Credit Suisse, but is being sold to fund of hedge fund manager Grosvenor Capital Management. CFIG has broad experience running emerging manager programs, and last year was hired to run a similar program by the California Public Employees’ Retirement System.
“We see this program as our farm team – a way to identify the next generation of investment stars, break down the high barriers to entry for these talented managers, and have Allstate be a catalyst in the success of emerging managers,” Alvarado said in a statement.
Definition is essential in determining what makes an emerging manager, as different programs across the country target different groups based on how they define emerging managers. Allstate’s criteria include a manager on its first, second or third institutional fund with less than $500 million in assets under management.
Also, at least 33 percent of a participating firm must be owned or controlled by women and/or minorities, or at least 50 percent of fund carried interest must be paid to women or minority staff, Allstate said. Allstate will consider committing to managers that are not necessarily “emerging,” but are minority and/or women-owned, Alvarado said.
Allstate has not yet made an investment in the program, but already has a healthy pipeline working with CFIG, Alvarado told me in a recent interview.
A key aspect of the program is performance – there is a perception that such specialized investment programs do not perform as well as more mainstream offerings.
However, Alvarado disagreed. “The perception is pretty widespread, not only in terms of emerging managers, just in general investing in diversity-type programs, there’s always a perception there’s some subsidy involved, whether in returns or underwriting or additional risk associated with that,” Alvarado said.
“We’ve developed a track record here with other programs that show that is not the case,” he said. “We can do social good and still make commensurate, attractive risk-adjusted returns.”
Allstate had to be comfortable with CFIG’s change of ownership, Alvarado said. The group was upfront about the situation and Allstate performed additional due diligence to make sure the platform still met the needs of the program, he said.