LPs

Michigan pension system aims to lift PE exposure in ’19

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State of Michigan Investment Board, pension fund, private equity, venture capital
Harbor view of Mackinac Island, Michigan, from Lake Huron. Michael Deemer/iStock/Getty Images
  • Board to raise PE target to 18 pct from 16.5 pct
  • $73 bln system wants to tilt to middle-, lower-middle-market funds
  • December was first regular meeting of newly reorganized board

State of Michigan Investment Board at its December meeting reported $435 million in third-quarter PE commitments, aiming to increase its exposure to the asset class in 2019.

The board, which manages $73.1 billion in assets in four state retirement plans, set an 18 percent target allocation to private equity for 2019. It just about reached its 16.5 percent 2018 target, with a 16.4 percent allocation as of September.

New commitments made in Q3 2018 include:

  • $100 million to Riverside Micro-Cap Fund V, a buyout fund that closed on $1.2 billion in August;
  • $150 million to Ardian Investment Switzerland’s ASF VIII fund, a secondary investment fund;
  • $75 million to Vista Equity Partners VII, a technology and software buyout fund;
  • $50 million to Permira Growth Opportunities I, a growth-equity fund that had raised $1.2 billion as of May;
  • $60 million to TI Platform SMRS SMA, a micro-VC separately managed account

The board’s PE strategy calls for a broad range of investments over the next 12 months. The system will pursue buyout, venture capital, secondary and growth-equity funds from current GPs raising successor funds, as well as new relationships, meeting materials show.

Michigan plans to tilt slightly toward the middle- and lower-middle market to diversify its exposure to large funds, the materials say. And the system plans to use co-investments to reduce its average PE costs and pursue specific investments.

The December meeting was the first quarterly meeting of the new state investment board, which is a successor to the previous state investment advisory council.

The new board, created via executive order from outgoing Republican Gov. Rick Snyder in September, assumes fiduciary duty over the retirement systems, which had previously been the sole responsibility of the state treasurer.

When the new organization was created, it maintained the same CIO and investment staff, the same asset-allocation targets, and the same board members as the former organization and was chaired by the treasurer.

The board is planning for its biannual asset-allocation review, scheduled for mid-2019, according to a spokesman.

Action Item: The executive order that created the new board: https://bit.ly/2Aogn2o