February public pension plan commitment summary:
- February brought back volatility in both equity and fixed income markets as inflation and the Fed took center stage again.
- Alternatives, as a result continue to be the allocation of choice for many allocators as they continue attractive risk VS return characteristics and concurrently help to lower intra-portfolio correlations.
February was a very active month with 136 individual commitments totaling $12.09 B allocated among 104 individual managers. There was one termination, as Manulife Total Return Bond was removed from the ND State Investment Board lineup. 44 individual pension funds made commitments during the month.
The top allocations during the month were:
- Connecticut Retirement allocating $1.375 billion
- Mass PRIM allocating $1.10 billion
- Washington State Investment Board allocating $1.05 billion
Asset Classes- Private Equity had been allocated the most via asset class at 40% of commitments, with Private Real Estate receiving 20% which is the highest in over 5 months, Private Credit maintains a consistent top third with 19% of commitments.
Sub Asset Classes-PE Middle Mkt Buyout was the largest sub-asset allocation taking in 17% of commitments, in second Infrastructure allocations have been very consistent over the past 2 quarters and this month took in 9%. Core Real Estate took in 6% of commitments in third place, reversing a trend we saw begin at the end of Q3 2022. It is worth mentioning that we saw the highest amount of individual sub-asset classes allocated to this month at 36 sub-asset, where we usually see 25-30 each month represented.
Looking at the top shifts made this month:
- CT Retirement Plans allocated $300 M each to HarbourVest Co-Invest PE and HarbourVest Private Debt funds, $600M among BlackRock Global Infrastructure IV, CT real Assets Co-Invest and Global Infra Partners, and $175 M to Vistria Middle Mkt Buyout Fund V. This is largest allocation they have made to infrastructure in a number of years as the majority of dollars had gone to PE and private credit.
- Mass Prim allocated $335 M to TA Growth equity Fund XV, $300 M to Hellman and & Friedman Cap Partners XI large buyout, and $285 M to GTCR Middle Mkt Buyout Fund XIV.
- Washington State Investment Board also allocated over a billion this month with GTCR Middle Mkt Fund XIV allocated $650M (the largest single allocation in three months to a single manager by an allocator), and $400 M split among two farmland managers Olympic Sun and Homestead Capital Fund IV.
- As we noted above, the North Dakota State Investment Board terminated Manulife Total Return Bond fund in the amount of $460 M as they no longer wanted to maintain a short duration mandate. They have yet to replace this mandate but noted a longer duration stance could make sense given the yield moves.
- It is worth highlighting that for the first time in over a year allocations to a CLO mandate were made as San Jose Police and Fire allocated $31 M to the Eagle Point Defensive Income Fund. While we normally see CLO/floating rate allocations made at the beginning of a hiking cycle, there are often instances where CLOs are preferred to other below investment grade credit because of their diversification and secured placement in the capital stack of a company.
