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How far along are public plans’ private equity programs?
4 January 2020

We reviewed asset allocation documents from 180 U.S. public plans and 57 U.K. public plans available on eVestment’s Market Lens through Q3 2019 and found that, in aggregate, U.S. plans were almost fully allocated to private alternatives whereas U.K. plans had room to enter into further commitments. Using the most recent data, U.S. public plans as a whole were 32 bps below their collective private alternatives targets versus 128 bps for U.K. public plans.

However, on a plan-by-plan basis we still see significant opportunities in the U.S. as well as in the U.K. Below we show current and target allocations to private alternatives (excluding real estate) with bubble sizes corresponding to each plan’s allocation surplus or shortfall in dollar amounts. The opportunities among under-allocated plans total $37.7 billion from a sample which includes 180 U.S. plans managing $3.4 trillion and 57 U.K. plans managing £176 billion.

Current & Target Allocations to Private Alternatives

Source: eVestment Market Lens

This chart shows private equity, private debt and “blended” private alternatives allocation categories using each plan’s most recent disclosure in the year ending Sep-30-2019; we excluded identifiable private real estate and other real assets categories for this exercise. U.K. plan figures quoted in USD converted using GBPUSD of 1.2727

Bubbles that are larger or further away from the diagonal line in the upper triangle represent plans which are strong candidates for committing fresh capital, while those in the lower triangle may be ripe for secondary sales. Bubbles that are smaller or hew closely to the diagonal line are more likely to be selective about additional commitments or to have their current investments “run-off” to target levels, while maintaining a pipeline and style/vintage diversification, if over-allocated.

Current allocation figures do not take into account undrawn, but already committed capital, so under-allocated plans may well be closer to their strategic targets than illustrated above. Pertinent details to each plan’s true progress, including PE program particulars, open mandates, and allowable asset class target ranges, are available on Market Lens.

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