Employees’ Retirement System of Rhode Island Poised to Surge Past PE Target

By David G. Barry


The Employees’ Retirement System of Rhode Island (ERSRI) is on course to blow past its 2022 pacing plan for private equity.

The State Investment Commission, which oversees the $10.5 billion plan, approved a commitment of up to $50 million to Advent International’s Global Private Equity X, L.P. With that fund, ERSRI will have to date committed $240 million to the 2022 vintage year. Its private equity pacing plan calls for it to commit $200 million to $250 million during the year. However, in a staff report, Treasurer Seth Magaziner of the Office of the State of Rhode Island – which manages the fund – said that given ERSRI’s pipeline, it expects to make two to four additional commitments totaling between $50 million and $80 million during the remainder of 2022. This would bring its private equity commitments for the year to between $290 million and $320 million.

As of March 31, ERSRI had 14% exposure to private equity – slightly above its 12.5% target allocation.
ERSRI, however, is not the only pension fund that will end up overallocated to private equity. There is currently a sizable number of firms seeking to raise capital. In fact, on its quarterly investor call, Carlyle Group CEO Kewsong Lee said a “crowded” fundraising environment could result in longer timeframes for raising private equity funds.

The Advent fund that ERSRI is backing is looking to raise $23 billion, or $5.5 billion more than its prior fund. Advent will use the fund to do target buyouts of companies with enterprise values primarily between $200 million and $5 billion.

At the meeting, the State Investment Commission also approved up to $25 million to GEM Realty Capital’s Fund VII, a non-core real estate offering, and a $100 million allocation to Advent Capital Management – which is not connected to Advent International – for its Balanced Convertible (U.S.-focused) strategy.

GEM’s fund is expected to be broadly diversified across property types, but to be anchored by exposure to residential, hotel and office assets. GEM is ERSRI’s first 2022 Non-Core Real Estate Commitment.
And in fact, ERSRI is slightly underinvested in real estate as it had a 2.1% exposure to non-core real estate and a 2.5% target and 3.1% exposure to core real estate – a bit below its 4% target.

Advent Capital is a long-only investor in convertible bonds. The Balanced Convertible fund was seen as the “best fit” for ERSRI’s investment objectives, according to the Treasurer Office’s note.