By Muskan Arora
In alignment with the 10-year pacing plan, the $166.4bn State of Wisconsin Investment Board hiked its private equity/debt target allocation from 18% to 20%, a slight increase from 2024 pacing plan.
This doesn't come in as a surprise as the system has been making efforts throughout the year to increase its exposure to private markets to reach a 35% exposure within its total portfolio.
Last year, the pension plan increased its target from 15% to 18% for its private equity/debt sleeve.
SWIB has been a leader within the private equity space, and believes that this change would aid the system to gradually widen the $131.5bn core trust fund’s exposure to private markets, alongside “reflecting long-term liquidity” needs.
Through its PE portfolio, the system targets leveraged buyouts and venture capital, mostly in funds or partnerships.
Click Here for More Information
For its private equity/debt, the ten-year sharpe ratio is at 0.19% and the 10-year geometric return at 8.1%.
The recommended range for PE/debt target allocation is
between 12% and 28%, as per the meeting materials.
“For long-term investors with a strong liquidity position,
Private Equity/Debt offers an attractive vehicle to implement equity exposure
while increasing opportunities to add value,” stated CIO Edwin Denson in the meeting
materials.
To reduce the volatility impact of this hike, the system has
reduced its target allocation to public equity from 40% to 38% of the core
trust fund.
For the public equity sleeve, the 10-year geometric return
is at 5% and sharpe ratio at 0.05%, with a new target range of 32%-44%.
These targets would be effective from fiscal year ending
December 31.
Consultant NEPC confirmed that these changes would have
limited impact on target return and volatility of CTF.
Targets that remained the same are 27% for fixed income, 19%
for treasury inflation-protected securities and 8% for real estate.
The core trust fund allocates 33.6% to public equities,
23.6% to fixed income, 17.5% to private equity/debt, 16.9% to TIPS, 8.1% to
real estate and 0.3% to cash and overlays, as of September 30.
