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PA SERS to overhaul alternatives

The $24bn pension has made $125m in re-up commitments as part of its new strategic investment plan.

The Pennsylvania State Employees’ Retirement System, which once saw its alternatives exposure spike well above its target allocation, plans to cut its current allocation to the asset class from 27 percent to 14 percent over ten years.

Significantly, PA SERS plans to do this without using the secondaries market, according to a spokesperson for the pension. As part of its 2012-2013 strategic investment plan, the pension will work to reduce general partner relationships from 149 to between 60 and 80 in five years and between 40 and 50 in ten years.

Private equity, which accounts for 63 percent of its current alternatives exposure, would increase to 65 percent after five years and remain at that level for the following five years, according to pension documents.

The $24 billion pension system is also currently pursuing a number of other strategic initiatives as part of the plan, including reducing investment fees, emphasising separate – not commingled – investment mandates and limiting total new commitments to alternatives at $500 million per year.

On Wednesday, PA SERS reinvested $125 million through its alternative investment portfolio, using distributions to fund re-up commitments to AXA Private Equity and Asia Alternatives Management.

The retirement system committed $75 million to AXA’s Secondary Fund V-B and $50 million to Asia Alternatives Management’s third fund of funds, according to Pennsylvania documents. PA SERS is a limited partner in AXA’s previous two secondaries funds and Asia Alternative Management’s previous two funds of funds.

A 2010 vintage fund, AXA’s fifth secondaries vehicle has raised roughly $3 billion toward a $3.5 billion target, while Asia Alternative Management’s third fund of funds, launched last year, has collected about $293 million, according to data provider Private Equity Connect.

Both commitments move PA SERS’ fund toward new asset allocation targets, according to pension documents.

As of 31 December, PA SERS had $6.3 billion committed to alternatives.