Venture could benefit from hike in Florida SBA’s PE target

The pension system could pump more money into venture and buyout funds if it approves a recommendation to hike its target to private equity from 6 percent to 10 percent.

Florida State Board of Administration, one of the biggest institutional investors in the country, has advanced a plan that would hike its target to private equity target from 6 percent to 10 percent of its assets.

The move comes on the heels of the state’s decision in May to increase how much Florida SBA can allocate to alternative investments from 20 percent to 30 percent.

Florida SBA’s investment advisory committee meeting voted to boost the PE target at its June 27 meeting. The proposal now goes to the full board, which will hold a vote at its August 22 meeting.

Florida’s $180.4 billion state pension is the only plan under Florida SBA’s management that invests in alternative assets. The system’s current target allocation for private equity is 6 percent, although its actual PE allocation sits at 9.5 percent, according to consultant Aon, which recommended the increase to the allocation.

Heavy on the VC

A presentation prepared by Aon shows that Florida SBA is currently over-weighted to venture capital. The system has set a target for buyouts to make up 65 percent of its $17.3 billion PE portfolio, with distressed investments at 15 percent and VC and secondaries at 10 percent each. As of December 31, the actual breakdown was 60 percent to buyouts, 26 percent to VC, 9 percent to distressed and 5 percent to secondaries, the presentation shows.

Even though its is over-weighted for venture capital, Florida SBA’s annual PE investment plan still considers venture capital in North America and Europe a “medium priority,” which is the same rating it gives to mid-market buyouts, small buyouts and growth equity for those same regions. The only strategy rated a “high priority” in the plan is distressed/turnaround for North America. In contrast, large buyouts for North America, Europe, Asia and the rest of the world are rated as a “low priority.”

Florida SBA’s VC commitments this year include $100 million for TrueBridge Capital FSA III, a venture fund managed by TrueBridge Capital Partners, and $20 million for SVB Capital Partners VI, a VC fund of funds managed by SVB Capital.

The pension system’s 2022 VC commitments included the following:

  • $85 million for Tiger Iron Special Opportunities Fund III, which appears to be a VC fund of one managed by Tiger Iron Capital;
  • $75 million for Carnelian Energy Capital IV, a venture fund managed by Carnelian Energy Capital;
  • $30 million for TrueBridge Blockchain I; and
  • $20 million for OpenView Venture Partners VII.

Biggest partners

Florida’s two largest GP relationships are SVB Capital and Lexington Partners.

Lexington, a secondaries specialist, is the system’s largest GP and comprises 11 percent of the system’s private equity portfolio. Florida has made $2.85 billion in commitments to 12 Lexington funds and co-investments, starting with Lexington’s fourth flagship fund.

SVB Capital is the system’s second-largest GP. According to the presentation, the system has around $1.45 billion of net asset value with SVB, which makes up 8 percent of the system’s total private equity portfolio.

Florida defines alternative investments as private equity (which includes buyouts, VC, secondaries and distressed funds) and a “strategic investment” asset class made up of hedge funds, infrastructure and private debt. To boost the allocation to PE, AON has recommended reducing the target for strategic investments from 12 percent to 4 percent. Much of this reduction would come through the creation of a new active credit strategy, comprised of both public and private credit investments, with a 7 percent target.

Strategic investments would still contain allocations to real assets, insurance-linked securities, hedge funds and investments labeled as opportunistic if the recommendations are approved.

The private equity, strategic investments and active credit asset classes would have a combined target of 21 percent, still below the new maximum allocation of 30 percent to alternatives.

This story was updated on July 29 to say that Florida SBA’s investment advisory committee approved a proposal to increase its private equity allocation.