January public pension plan commitment summary points:
- The first month of 2023 has treated public equity markets with much less volatility VS how 2022 began and has been a welcome change for both allocators and managers.
- The same is true with the bulk of the fixed income markets reflected via less spread movement across most fixed income sub-sectors as allocators have more information on the Fed’s intentions today, VS a year ago.
- With 2022 now closed, the Public Pension funded ratio closed out the year at 8% VS 74.7% in 2021. Heavy concentration among public pensions in real estate and private equity were major factors, in addition to higher employer contributions. These all contributed to public pensions ending 2022 in a stronger position than 2021.
In January we saw 103 individual commitments totaling $8.56 B allocated among 73 individual managers. This compares to 158 commitments made last month but is typical for the new year to start slow due to less committee meetings taking place. 44 individual pension funds made commitments in January.
The top allocator moves during the month were:
- NY State Common shifting $1.63 billion.
- Washington State Investment Board allocating $1.025 billion.
- Texas Teachers allocating $925 million.
Asset Classes- Private Equity had been allocated the most via asset class at 43% of commitments which is the largest percentage we have seen since covering public commitments, with Real Assets receiving 19% and the highest for Real Assets in over a year, and Private Credit with 16% of commitments.
Sub Asset Classes- Private Equity Middle Market Buyout was the largest sub-asset allocation taking in 18% of commitments, in second and as we had noted last year Infrastructure allocations have been consistent and this month took in 16%. Many of the committee notes we reviewed stated these allocations are in response to “carbon/greening” investment opportunities in addition to consistent global need for private funding of infrastructure projects. Private Equity Large Buyout took in 10% of allocations.
The biggest shift in allocations was the drop in real estate allocations in general but given the amount of capital allocated here since 2021 looks to be mean reverting.
Looking at the top shifts made this month:
- NY Common had terminated $483 million out of Rockefeller Asset Management’s Global Equities fund, this caught our attention as this was one of the larger equity shifts we have seen from them over the last year. They have yet to replace this mandate. $350 million into Apollo’s Large Buyout Fund X and $300 million into another large buyout fund, Hellman & Friedman Capital Partners XI.
- Washington State allocated $500 million to the Stonepeak Infrastructure Core Fund, another $300 million to Global Infrastructure Partners V, and a VC allocation of $225 million to Menlo ventures. This is largest allocation WA State has made to infrastructure in a number of years as the majority of dollars had gone to Private Equity.
- It is worth highlighting that San Diego CERS allocated $400 million across four fixed income mandates focused on total return and global total return run by Wellington, PIMCO, Apollo and Guggenheim. Additionally, New Hampshire Retirement allocated $160 million to core/total return mandates. This is the largest single month allocation we have seen to “traditional fixed income” in over 14 months and could signal an allocation shift back into core bond mandates by committees.
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