Pension Fund: The Connecticut Retirement Plans and Trust Funds
Program: The Connecticut Horizon Fund
Target: $120 million to $150 million
Targeted Managers: Connecticut-based firms, minority or women-owned firms, and emerging private equity managers
Targeted Asset Classes: Buyout firms, mezzanine funds, special situations firms, venture capital firms
Connecticut’s state pension plan, The Connecticut Retirement Plans and Trust Funds, is looking to diversify its portfolio by backing asset managers that tend to fly under the radars of most large institutional investors, including Connecticut-based firms, women and minority-owned firms, and emerging managers with less than $2 billion in assets. The idea is to find tomorrow’s private equity superstars before they are overrun with limited partner demand.
The state plans to back managers pursuing a variety of private equity strategies, including buyout, mezzanine, special situations and venture capital. The program, structured as a fund of funds with $120 million to $150 million to commit, represents the second phase of the Connecticut Horizon Fund set up by the $24.5 billion state pension fund. The first phase—investing in up-and-coming liquid asset managers—was initiated last year, and the state has already put almost half a billion dollars to work.
“It’s not a traditional fund of funds—it’s one that provides an infrastructure to these smaller funds so that they can find success,” Connecticut State Treasurer Denise Nappier said earlier this month during her keynote address at the 19th Annual Buyouts Symposium East in New York. “But their returns have got to be just as good as they are for the mainstream private equity firms, and to the extent that they are not, they will be terminated.”
Last year, as part of its first phase, the Connecticut Horizon Fund program put a total of $435 million to work with four fund-of-funds managers, money that was ultimately earmarked for domestic equities, international equities and fixed income portfolios. Those investments “are already meeting or exceeding the performance of our more traditional liquid investments,” Nappier said.
“We believe if we limit ourselves, we are going to miss out on the best opportunities out there,” Nappier added. “So we are strongly committed to opening our doors where we believe we can get superior returns.”—A.N.