Florida State Board of Administration Exceeds Alternatives Limit, Halts New Sector Investments

By David G. Barry

The Florida State Board of Administration (SBA)
has exceeded its legislative allocation limit for its alternatives segment and as a result is unable to make new private equity, venture capital, private credit, hedge or infrastructure commitments.


The system is required by Florida Statue to cap alternative investments at 20%. The SBA went above that figure during the April-June quarter. At the end of April, it was at 20.3% – with private equity, which includes buyout, venture capital, distressed equity, secondary funds and co-investments, accounting for 9.8%, and strategic investments – consisting of hedge funds, private credit and infrastructure – at 10.5%. The target allocation for private equity is 6% while the target for strategic investments is 12%, meaning the system is actually underweight to the sector.


As of June 22, the allocation figure was at 21.14%, said Emilie Oglesby, an SBA spokesperson.

At the June SBA Investment Advisory Council meeting, Lamar Taylor, SBA’s interim executive director and chief investment officer, said the SBA had seen the issue coming and attempted to “get legislative headroom” but was unsuccessful. He said the SBA will attempt in the fall to have the Florida Legislature lift the cap on alternatives.

Taylor said the SBA is not under pressure to sell assets and anticipates that the issue “will be managed through our commitment pacing process.” The pension plan, he said, will not make additional commitments to the space while above the 20% figure. At the end of April, the SBA managed $241 billion, $189 billion of which is from the Florida Retirement System Pension Plan.

 The SBA exceeded the cap “totally because of valuations and not a purposeful overallocation to the space,” Taylor said. A number of the asset classes did well over the past year, but “private market assets did even better,” he said. The end result is that alternatives became a “disproportionately larger part of the total fund,” something that has grown as equities have declined in recent months.

According to a report presented at the Investment Advisory Committee, the SBA’s private equity portfolio generated a one-year return of 44% and a three-year return of 31%.