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PE HUB Wire Highlights, 9.21.18

PE fireworks in Pennsylvania, Social Capital to invest from balance sheet, Fundraising slows but big names get ready to come back

Happy Friday!

Fireworks: Drama in the Keystone State. As has happened before, a political administration is laying a heavy hand on its pension systems’ ability to invest in private equity.

The concern is such political pressure will cause the systems to halt private equity investing for a time. This can create a potential gap in the program’s vintage years, impacting both the diversity of the portfolio and overall performance.

Such starts and stops can also impair an institution’s ability to access the best managers in the business, who look for partners that will be with them fund after fund.

Pennsylvania’s Gov. Tom Wolf, and its vocal state Treasurer Joe Torsella, have pushed back against the two state pensions’ plans to continue investing in alternatives.

Specifically, Torsella has targeted Pennsylvania State Employees’ Retirement System’s 2018-2019 investment plan. The plan calls for a focus on commitments of $75 million or more in top-performing GPs and sets an annual investment pace for PE at $650 million.

PA SERS wants to build long-term strategic partnerships, reduce the number of GP relationships and improve its ability to negotiate lower fees, the plan said.

Wolf, meanwhile, in August asked the state’s two large pension pools to stop high-management-fee activity and “cease other commitments, terminations, or changes in investment strategy that do not address an immediate portfolio de-risking or increase short-term liquidity,” according to the governor’s letter.

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