By David G. Barry
“While you see a chance, take it.”
The Florida State Board of Administration appears to have taken Steven Winwood’s song to heart over the summer.
Currently restricted by state policy from making new alternative commitments, the SBA took advantage of a small window during the third quarter to commit $251 million to five private equity funds – including what appears to be its first dedicated cryptocurrency-related vehicle - and another $100 million in a distressed-focused fund.
The SBA has been restricted since earlier this year from making new alternatives investments because of a Florida Statue which caps alternative investments at 20%.
As of June 30, the alternatives figure was at 21.4% with a 10.2% actual allocation to private equity and a 11.2% allocation to strategic investments. The private equity sector includes buyout, venture capital, distressed equity, secondary funds and co-investments. Strategic investments consist of hedge funds, private credit and infrastructure.
It has largely stated above that 20% figure, but “for a few days” in August “fell slightly below the cap,” said Emilie Oglesby, an SBA external affairs manager. During that period, the SBA was able to make additional commitments, she said. As of Nov. 9, the SBA was back over its cap at 21%, she said.
Lamar Taylor, SBA’s interim director and chief investment officer, is currently leading an effort to get the legislature to increase that limit, hopefully in early 2023.
SBA’s private equity investing the third quarter included commitments to two new managers: One Peak Partners and Paragon Partners GMBH.
SBA is committing up to $51 million to each manager.
It also committed to two venture-related funds, putting $20 million in OpenView Advisors’ seventh fund and $30 million into TrueBridge Capital Partners’ Blockchain 1, LP. TrueBridge, a fund of funds, will invest the fund in blockchain and cryptocurrency-focused venture funds.
Oglesby could not confirm it was the SBA’s first investment in a dedicated cryptocurrency fund, but a review of its past investments over the past seven quarters does not disclose any similar investments.
SBA also invested $100 million in Thoma Bravo’s fourth fund.
As for its strategic investment portfolio, it deployed $100 million in a distressed fund from Edelweiss Alternative Asset Advisors.
In addition to its private equity and strategic investment commitments, SBA also invested just over $350 million in funds from four real estate managers. It made a $200 million commitment to a fund from Stockbridge, $100 million to one from Exeter Property Group and just over $38 million to Heitman Capital Management and $13 million to L&B Realty Advisors.
SBA also committed a total of $830 million to four global equity managers: TimeSquare Capital Management, Allspring Global Investments, Kayne Anderson Rudnick Investment Management and Copeland Capital Management.
For the fiscal year ended June 30, the $180 billion Florida State Retirement System (FRS) – which accounts for 79% of the $228 billion that the SBA oversees – returned a negative 6.3%, beating its benchmark return of negative 9.1%. That compares with a return of 29.5% for the fiscal year ended June 30, 2021.
Private equity returned 24.4% while strategic investments produced a 7.8% return. Real estate gained 22.4%.
Meanwhile, fixed income reported a negative 8.1% and global equities a negative 17.2%.
Global equities accounted for 48.4% of the portfolio as of June 30, while fixed income was 17.7% and real estate 11.3. The remaining 1.2% was in cash and cash equivalents.