Private equity has also drawn the attention of Larry Schloss, chief investment officer and deputy comptroller for pensions for the New York City employees’ pension fund. In a recent report from Bloomberg Businessweek, Schloss stated his intention to increase the city’s allocation in private equity to 6.5% from 4%, while using fewer firms, in pursuit of total returns of 8%.
The pension will sell about $2 billion in existing private- equity funds as it seeks to pare relationships to about 70 firms in the “top quartile” from 106 when Schloss joined the pension in January 2010, he said. The city will “write bigger checks” of more than $300 million, versus about $100 million on average to each fund before the overhaul, he said.
“When I got here, we had $12 billion commitments, $7.2 billion in the ground, 106 GP relationships and 162 funds,” Schloss said. “Our 12-year IRR was 6.8 percent -- not very good,” he said, referring to the internal rate of return.
The $41.8-billion New York City Employees Retirement System, whose 347,000 members are the most of any U.S. municipal retirement fund, aims to generate returns of at least 8 percent, Schloss said. Private-equity firms, which typically buy companies using loans secured on the targets and work to improve performance before selling them in five to 10 years, are a long- term commitment that offer potentially the highest returns, Schloss said.
“We have great expectations for private equity,” he said.
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