Maryland State Retirement and Pension System has placed a focus on increasing its allocation to small and mid-market buyouts strategies as the fund continues to try and cut away at its private equity overallocation.
The fund, which met for its investment committee meeting on February 25, noted that it would be looking to match its target allocation of 20-30 percent for small and mid-market buyout funds, while reducing its exposure to large and mega-buyout funds.
MSRPS allocates 18 percent of its private equity portfolio to small and mid-market buyout funds, compared with 45 percent to large and mega-cap buyout funds.
Under the new allocation targets, MSRPS will aim to keep large and mega-cap strategies between 35 and 45 percent of its PE allocation.
The initiative comes as MSPRS attempts to reduce its overall exposure to private equity. The pension fund has allocated 21.4 percent of its portfolio to the asset class, as of September 30, compared to a 16 percent target, as previously reported by Buyouts.
To reduce the pension fund’s allocation to private equity while increasing its small-mid market buyout exposure, MSRPS’s staff noted that it would have to “continue to concentrate” its portfolio of core mangers, while developing new relationships with emerging managers.
“I think the constant evaluation of small and mid-market funds is an area we’re going to continue to grow,” said one of the fund’s consultants from Hamilton Lane. “It’s just they might not all be really small funds, they might be funds that are going to scale to a point that makes sense for the portfolio, because we have to put big dollars to work.”
MSRPS expects to commit between $1.5 billion and $2 billion to its private equity asset class over the next several years, according to meeting materials. The fund will plan to maintain “meaningful” commitment sizes to its core managers in an effort to manage exposure and drive co-investment activity.
Last year, MSRPS made one new commitment out of six total commitments on the year, a figure that the fund’s staff said it hopes to increase in 2025.
MSRPS is also working to build a private equity dedicated emerging managers program, as previously reported by Buyouts.
The program would invest $250 million in emerging private equity managers over the next five years and give more structure to a previously “fragmented” effort to invest in more emerging managers.
The program would also look to deploy funds to emerging managers specifically in Maryland, constructing an in-state component to the program.
link
