Guardian Life Insurance Company of America is in the third year of its five-year private equity program, and the limited partner has lots more to spend. The LP’s program calls for it to invest $200 million each year to the asset class.
David Turner, managing director and head of private equity, explained that besides having a target allocation to the asset class, he also has an annual investment budget so he can stay in the market as opportunities arise. “It’s important to stay in the market regardless of constraints, and a target allocation alone only creates a stranglehold,” he said at a recent industry conference in New York.
“We do set a percentage-based allocation for target and operating purposes but also set an annual capital investment budget, currently around $200 million,” Turner told Buyouts. “We do this in order to maintain our exposure within reasonable risk parameters and continue investing at a steady state to stay in the market.”
Guardian Life’s private equity and real estate allocation stood at 1.8 percent, or $495 million, as of Dec. 31, 2008. Turner declined to state the target allocation to private equity.
At the conference, Turner noted that he has a preselected group of managers he intends to commit to in 2010. He also said that he’s already chosen how he will pledge half of his 2011 capital and that he has even determined the placement of some of his 2012 capital. This year, he pledged to a handful of venture capital funds and a couple of small buyout funds. He also used the capital to make some secondary commitments, including the purchase of a portfolio of more than a dozen funds from an institutional investor.
In the past 12 months Turner said he backed an undisclosed emerging manager that spun out of another firm. In that case, he already knew the team, so it was “familiarity and a past track record that got us there,” he said.
Past commitments have gone to Evergreen Pacific Partners, a Seattle-based private equity firm focused on the middle market, which closed its second fund last year with $425 million. Pledges also went to mid-market buyout firm Pfingsten Partners LLC and the $225 million debut fund of Foundry Group, an early-stage venture firm.
At the conference, Turner issued a joking word of warning to those thinking of getting into the private equity industry: “Stay on good terms with your cardiologist: it’s not for the faint of heart.”
Turner joined Guardian Life Insurance as head of its private equity investment initiative in May 2007. He came from WestLB Mellon Asset Management’s private equity group where he served as general partner and, most recently, chief executive officer and chief investment officer. Before that, Turner spent 17 years with the State of Michigan Retirement Systems where he was a senior portfolio manager and then head of the alternative investment division.