Penn. Pension Sells Off $1.75B of PE Funds-of-Funds

The $53 billion public fund is dialing back private equity exposure with one of the largest secondary transactions of 2014.

The Pennsylvania Public School Employees’ Retirement System (PSERS) has sold a $1.75 billion package of private equity investments to secondaries player Ardian.

The deal—one of the largest in 2014—included 17 limited partner stakes in private equity buyout funds-of-funds. Most of these investments focused on US large cap and middle market spaces, according to the public relations firm representing Ardian.

The $53 billion pension fund and Paris-based secondaries firm closed their transaction last month.

“PSERS is endeavoring to reduce its exposure to private equity to 15% of the fund’s size,” said the pension’s CIO James Grossman. “The depth of the secondary market makes possible a large asset sale that will bring us closer to our long-term target.”

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Private equity accounted for 16.3% of the fund’s total portfolio as of September 30, 2014, according to PSERS’ documents. The pension began shedding exposure to the asset class last summer, reducing its total portfolio value by $415 million between June and September.

Last month’s deal with Ardian would bring PSERS’ private equity allocation down to roughly 12.7%.

Relative to other asset classes, PSERS’ has had to maintain relationships with a very large number of private equity managers. Between that asset class and its much smaller venture capital allocation ($900 million), the pension fund had investments with 73 separate firms as of September 30, 2014.

PSERS’ roster for its $7.1 billion real estate portfolio, for example, comprised of 39 managers.

PSERS’ Asset Allocation as of June 30, 2014

PSERS

Source: PSERS

Home > News > Asset Allocation > China, Oil, and Greek Elections: Deutsche Bank Looks Forward (and Back)

Asset Allocation January 5, 2015

China, Oil, and Greek Elections: Deutsche Bank Looks Forward (and Back)

Deutsche Bank has ranked the best and worst investments of 2014—and has a warning for the first hurdle of 2015.

A strong rally from the Chinese equity market helped it take top slot as the best-performing investment in 2014.

In a research note from Deutsche Bank, China’s Shanghai Composite index was shown to have gained 58% over the course of the year in dollar terms, largely due to double-digit gains in November and December.

Spanish, Italian, and UK government bonds all posted returns of 15% to 16% for 2014, outperforming the S&P 500’s 14% gain despite the benchmark hitting record highs during the year. Jim Reid, strategist at Deutsche Bank, said the performance of peripheral European bonds was driven largely by the prospect of the ECB introducing quantitative easing in 2015.

Oil and other commodities were among the worst investments in 2014, with the price of Brent crude oil collapsing 48% during 2014.

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Deutsche Bank - 2014 Asset Class Performance Looking ahead, Reid highlighted Greece as an important issue for investors at the start of the year. With a general election at the end of January, German newspaper reports have suggested that Greece is very likely to exit the Eurozone if the left wing Syriza party gains power, Reid wrote—although the German government has said it wants Greece to remain part of the currency bloc.

While German Chancellor Angela Merkel has stated that the Eurozone can cope with a Greek exit, Reid’s colleague George Saravelos, analyst, warned of “significant political and financial uncertainty” ahead of the election and a looming deadline for Greece’s current financing programme, which expires at the end of February.

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