PensionsDecember 14, 2023

Pennsylvania SERS Commits $220M to Private Equity, Real Estate

Along with new commitments to alternatives, the pension fund is also boosting pay for staffers.

Reported by Matt Toledo

The Pennsylvania State Employees’ Retirement System will commit $220 million in new investments to real estate and private equity, the board announced in its December meeting. The Pennsylvania SERS board also approved staff pay raises and reported quarterly and year-to-date returns.

The new investments continue the current trend among allocators to plug money into alternative assets. The SERS board approved an allocation of $100 million to private equity firm Clearlake Capital Partners’ new VIII fund. An additional $20 million could be allocated to follow-up investments, such as a sidecar vehicle in which SERS will co-invest alongside the PE fund.

An additional $100 million will be committed to real estate, specifically to the Ares PA Opportunities Fund LP’s Ares US Real Estate Opportunity Fund IV. Co-investments will also be made with Ares.

Asset Class Returns

The SERS board also gave insights into its asset returns in the year’s third quarter. Notably, only private credit, private equity and cash generated positive returns in the quarter, with the classes returning 2.96%, 2.22% and 1.33%, respectively.

For the quarter, Penn SERS returned negative 2.22%, but its year-to-date return through September was 5.10%, with much of that gain coming from equities, as U.S. stocks returned 11.88% and international developed market equities returned 7.58%.

Compensation

The board also approved new compensation guidelines for SERS staff, effective January 1, 2024. SERS investment professionals will receive a 3.6% increase in their salary. A cost-of-living adjustment was also made for SERS Executive Director Joseph Torta.

As of September 30, the system manages $34.4 billion in assets in its defined benefit plan and $155 million in assets in a defined contribution plan, jointly serving more than 239,000 members.