IPERS Reallocates Portfolio and Portfolio Agenda

The Investment Board of the Iowa Public Employees’ Retirement System voted to amend and update the system’s overall asset allocation plan. The reallocation increases the fund’s overall investment in private equity by 400 basis points. Private equity will now represent 17.0% of the portfolio’s assets.

The IPERS Investment Board had previously voted to increase private equity allocation to 13% from 11% of the fund’s portfolio in 2020.

The reallocation is not a move to allocate more fresh powder into the asset class, but rather allows the portfolio to not be a victim of its own success. The gains in the asset class have been so strong and consistent that the private equity portfolio was larger than allowed by the fund’s asset allocation. The issue arose as PE rose and other asset classes slumped in recent months.

“Private equity returned more than 68.0% and 23.0% in FY2021 and FY2022. Private equity’s historically strong performance means the current asset allocation exceeds the current policy target,” IPERS CEO Greg Samorajski said in a statement.

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“To avoid rebalancing illiquid assets and potentially diminishing the portfolio’s value, and to ensure vintage year diversification, the Investment Board responded with action that brings the allocations more in line with IPERS’ actual targets,” he continued.

The IPERS Investment Board annually reviews its asset allocation plan. This year, the board also raised its allocation in private real assets to 9.5%, a 100-basis point increase over its previous allocation.

These changes to the portfolio’s structure come after private equity outperformed public equity returns in allocations by state pension funds by an annualized 4.1% over the last 21-year period, according to a report put out by the Chartered Alternative Investment Analyst Association.

For the fiscal year ending June 30, the asset value of the Iowa PERS trust fund was $40.13 billion.

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Tags: Asset Allocation, Greg Samorajski, Iowa Public Employees' Retirement System

The bad news keeps growing for special purpose acquisition companies, as investments in them pull back, public offerings shrink, regulatory scrutiny sharpens and several important players call it quits. In 2020 and early 2021, these blank-check companies were the toast of Wall Street; now they’re just toast.

Most telling was the retreat of the SPAC King, as he was called, from this arena. Last week, Chamath Palihapitiya, a former-Facebook-executive-turned-startup-investor, announced he was shutting down two of his SPACs—Social Capital Hedosophia Holdings Corp. IV and VI—and his investment firm was returning $1.6 billion to investors.

A SPAC raises money by going public, and then has a year or two to deploy it by buying usually nonpublic businesses. But Palihapitiya wrote his investors to say that he couldn’t find good enough target companies to purchase.

Another recent high-profile departure illustrates how deep this problem is. Celebrated hedge fund magnate Bill Ackman said in July that he was folding his Pershing Square Tontine, the biggest SPAC ever, and giving investors back the $4 billion raised for it. He bemoaned “the extremely poor performance of SPACs that have completed deals during the last two years which has damaged market perceptions of going public by merging with a SPAC.”

His SPAC tried to do a deal for a chunk of Universal Music Group, but that foundered due to opposition from the Securities and Exchange Commission.

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Meanwhile, a SPAC’s plan to buy former President Donald Trump’s media company is in trouble. Investors in the SPAC, Digital World Acquisition, were pulling many millions out of the venture, according to the blank-check company.

Few SPAC deals are getting done, with fundraising for the entities dwindling and initial public offerings shriveled amid a severe stock bear market. Many once-celebrated SPAC deals have tanked. Sports betting firm DraftKings’ shares have dropped by almost half this year, far worse than the overall market. Virgin Galactic Holdings, a space-flight outfit founded by billionaire entrepreneur Richard Branson, has lost even more—almost two-thirds of its value—in 2022.

SPAC supporters say the concept still has a place in the investing world, but that its initial popularity lured too many weak entrants into the field—and once the market recovers, the asset class should find its feet.