Milwaukee pensions may move into alternative investments(2)

The Milwaukee city and county employee pensions, with combined assets of more than $4bn, are considering creating allocations for private equity and infrastructure investments.

The private equity world may see two new LPs emerge in the near future.

The $1.6 billion Milwaukee County Employees Retirement System is developing request for proposals for infrastructure and private equity managers. The pension’s board is still brushing up on its knowledge of the asset classes and is working with consultant Marquette Associates on the move.

Meanwhile, the $3.6 billion Milwaukee City Employees’ Retirement System also is considering moving into private equity and infrastructure investing. The pension’s consultant, Mercer Associates, has recommended a 5 percent allocation that would include both private equity and infrastructure investments.

The pension board has not yet approved moving into private equity and infrastructure investing, and will take up the issue at the board meeting 30 July, according to Tom Rick, chief investment officer for the city pension.

Milwaukee City  Employees is considering infrastructure as an “inflation hedge”, Rick said. The asset class is “something likely to be somewhat resistant to economic conditions”, he added.

The pension is looking to move into private equity as a way to “broaden our return strategies”, Rick said. The pension does not have any liquidity issues and is in a good position to move into the private equity asset class, he said.

Milwaukee County pension referred all questions about private equity and infrastructure to Marquette Associates. The firm did not return a call for comment Friday.

The City of Milwaukee has also been on infrastructure investors' radar for other reasons. In April, the city comptroller's office received 17 responses to a request for qualifications for a sell side advisor for a potential long-term lease of the Milwaukee Water Works – the water utility operated by the city.

Unlike other large cities which have undertaken long-term asset leases, such as Chicago, Milwaukee does not have the authority to charge its residents a local sales tax or an income tax, leaving dwindling property taxes as the only major source of revenue for the city of 630,000 going forward.

Last month, though, city aldermen voted to put that process on hold as they do research to see how much money the city could make if it kept the water works under its management.

The city faces a 2010 budget shortfall of $90 million or more.

Cezary Podkul contributed reporting to this article.