San Francisco Makes $1.1 Billion in Commitments, Mostly to Hedge Funds

The $25.5 billion San Francisco Employees’ Retirement System has committed more than $1.1 billion to hedge funds, private equity, real estate, and natural resources funds, shows a SFERS report.

All the manager commitments were approved by the retirement system’s board in closed session. Three of the manager commitments were approved at the board’s meeting on August 8, three at its June 13 meeting, and one each at its April 11 and March 14 meetings, show a report of closed session actions reviewed by CIO.

The biggest commitments were made to hedge funds. At the August SFERS board meeting, the report shows that $300 million was committed to ExodusPoint Partners Fund, a multi-strategy hedge fund, managed by Exodus Point Capital Partners.

Another commitment of $200 million was made to another hedge fund, East Lodge Capital Credit Opportunities Fund, at the board’s June meeting. An additional $25 million was made as a special investment in the East Lodge Credit Capital Partnership, the report said. The funds are managed by East Lodge Capital.

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At the April 11 meeting, $300 million was committed to two hedge funds: Solus Long-Term Opportunities Evergreen Fund and the Solus Series Domestic Fund. The hedge funds invest in distress debt and are managed by Solus Alternative Asset Management.

SFERS’s hedge fund portfolio totaled $3.1 billion as of August 31, shows SFERS data. The pensions system has been actively building its hedge fund portfolio since the board approved investing in the vehicles at its February 2015 meeting. The vote followed several years of controversy as divided board members split on Chief Investment Officer William Coaker Jr.’s plan to build a hedge fund portfolio.

Outside of hedge funds, the board at its August 8 meeting approved a $100 million commitment to GGV Capital VII, GGV Capital VII Plus, and GGV Discovery, three venture capital funds. The funds’ overall manager is GGV Capital.

Also at the August meeting, the board approved commitments of $15 million to Level Equity Growth Partners and $10 million in Level Equity Opportunities Fund. The two funds are considered growth equity funds within the SFERS $4.4 billion private equity portfolio. The funds are managed by Level Equity.

At its meeting on June 13, the board approved $50 million to Asian real estate manager’s Pamfleet Real Estate Fund III. At the same meeting, the board approved a commitment of $30 million to the Polaris Growth Fund I, managed by Polaris Partners. The investment is classified as a growth capital investment within the SFERS private equity portfolio.

At the March 14 meeting, the retirement board approved an investment of $100 million in Blackstone Energy Partners III. The Blackstone fund is classified as a natural resource investment.

Tags: Hedge Funds, Pension, Private Equity, Real Estate, San Francisco Employees’ Retirement System (SFERS)

Illinois’ largest pension system is asking for 10.6% more in state contributions for next year’s fiscal budget as a way to combat poor payments and reduced rates.

The $51.7 billion Teachers’ Retirement System wants about $400 million to be added to the budget, which would see total contributions rise to more than $4.8 billion.

The pension fund’s executive director, Dick Ingram, said the organization “had a good year.” And it did, returning 8.45%. But, he added, it simply cannot “invest our way out of this problem.”

That problem is the Teachers’ Retirement System’s 40.7% funding ratio. “The unfunded liability is too large and grows every year,” Ingram said.

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The plan has more than $75 billion in liabilities, the highest of the $130 billion total among the state’s five systems. The other four are the State Universities Retirement System, the State Employees Retirement System, the General Assembly Retirement System, and the Judges Retirement System.

According to Ingram, the principal and interest on the debt accounts for 76% of the state’s annual contribution to the fund. Absent the debt service, the state would only need to pay $1.2 billion the following budget year.

Illinois’ next budget year begins on July 1, 2019.

The state contribution was lowered three times in fiscal 2018. This expanded the liabilities by 3.04%, and increased the fund’s long-term liabilities by 3.9%, to $127.7 billion.

“Those unprecedented cuts totaled some $470 million and eroded progress toward financial stability,” Ingram said. “The future viability of TRS is directly dependent on continued state support that adequately meets the cost of benefits and pays off the unfunded liability.”

The state has never paid its full contribution to the teacher’s fund since its 1939 inception.

Tags: Funding Ratio, Illinois, Pension, Teachers Retirement System