Active VC investor Sacramento County to cut PE pace

The system, which has backed recent funds from Canvas, CRV, Khosla and Threshold, plans to target $260m in PE commitments in 2023, down from $340m so far this year.

Sacramento County Employees’ Retirement System, which has backed at least six venture and growth funds in the past two years, will reduce its private equity pacing plan in 2023 as it seeks to reduce its overweight allocation to the asset class.

Many public pension systems have found themselves overallocated to private equity amid a decline in the value of their overall portfolios. Some retirement systems plan on reducing their pacing plans in an attempt to find their way back to their targeted range.

Sacramento plans to target $260 million in commitments in 2023, down from $340 million committed this year, according to a presentation outlining the plan. The $11.8 billion pension system’s board approved the plan at its November 16 meeting.

So far this year, Sacramento has committed to six private funds, including one vintage-2022 venture fund, Threshold Ventures III, and a growth fund, Accel-Growth Capital Partners IV, according to PitchBook. It was much more active the prior year, when it committed to a dozen vintage-2021 funds, including four VC vehicles – Canvas Ventures 3, CRV Select Fund I, Khosla Ventures VII and OrbiMed Private Investments VIII, PitchBook reported.

Sacramento’s actual allocation to private equity stands at 15.4 percent, above its 11 percent target, according to the presentation.

The retirement system plans on shrinking its pacing plan to between $200 million to $300 million. Last year’s range was set between $250 million and $400 million, according to the presentation.

Staff also recommended the system target nine commitments and reduce the average commitment size to $30 million in 2023, according to the presentation.

The recommended plan would target commitments to five buyout funds, one distressed fund, two VC funds and one growth equity fund, according to the presentation.

Staff also recommended the system prioritize follow-on investments with existing managers.

Sacramento also is evaluating a potential secondaries sale across its portfolio and implementing a co-investment program, according to the presentation.

Sacramento uses Cliffwater as its alternative investment adviser.

Los Angeles City Employees’ Retirement System investment staff also recently recommended the pension system cut its private equity pacing plan at its November meeting.

Additional reporting by Lawrence Aragon