By Muskan Arora
The $36.6bn Pennsylvania State Employees’
Retirement System re-commited up to $200m to HarbourVest PA Co-investment Fund
Tranche II L.P over the span of three years.
The system will allocate $50m in the
calendar year 2024 and $80m per calendar year thereafter, as per the recent
meeting materials.
“The only change will be that this program
would fully focus on co-investments. The predecessor fund did have a 10%-20%
million allocation to our secondary strategy,” said Jackie Peradotto, principal
of co-investments at HarbourVest.
Consultant StepStone believes that a
follow-on commitment to HarbousVest is in-line with SERS’ strategic objective
of achieving the assumed annual rate of return at the least cost.
“So ultimately, our goal is to have the
opportunity to partner with you to build a diversified portfolio that delivers
strong risk adjusted returns at an attractive fee structure,” Peradotto added.
Penn SERS initiated its co-investment
program in 2020 with HarbourVest and Nueberger Berman as the managers.
“The reason is to contribute to our returns
alongside the co-investment structure allowing favorable fee terms," said
Ryan Morse, director of private equity program at Penn SERS.
“This is a way for us to enjoy returns that
we experience from other private equity opportunities but at a significantly
reduced cost,” added Morse.
SERS existing co-investment SMA with
HarbourVest has generated attractive returns of 1.4x net MOIC and 16% net IRR,
as of December 31.
Further, HarbourVest has agreed to an
additional fee reduction in the recommended $200m re-up, an improvement from
the already low economics offered in SERS’ 2020 investment with the manager.
Within its private equity sleeve, the
system has also committed to Clearlake VIII and Clearlake Sidecare.
Additionally, the system has also hired Institutional
Shareholder Services, Inc. as its proxy voting consultant for the SERS Defined
Benefit Plan for a five-year contract. The contract will immediately start
after the conclusion of the current contract.
The SERS portfolio saw investment gains of
approximately 12.2%, which exceeded the fund’s annual assumed rate of return of
6.875% that was in place during the year. The end of 2023 marks 10-, 15-, 20-,
and 25-year periods of returns of 6.7%, 7.7%, 7.1%, and 6.6%.
