South Carolina RSIC is seeking its first private infra allocation

The investment commission for the $31.8 billion South Carolina Retirement System will begin making private infrastructure allocations as soon as this year, according to the pension’s chief investment officer.

Geoffrey Berg, CIO of the retirement system investment commission, told Infrastructure Investor the pension will look to allocate up to $320 million to both listed and unlisted infrastructure funds in the 2018-19 fiscal year beginning 1 July.

RSIC has $625 million committed to listed infrastructure securities and made building-out the private infrastructure portion of its portfolio a key initiative for the coming fiscal year, according to documents published at the investment commission’s April board meeting.

RSIC established its infrastructure portfolio in June 2016 with that listed allocation, which Deutsche Asset Management oversees, Berg said. He believes the asset class will diversify the pension’s portfolio and offer insulation from changing economic factors such as rising inflation.

“We started thinking about things that will diversify the main risks we have,” Berg remarked. “We think infrastructure is an attractive way to do that. We don’t have a lot of options in terms of strategies that can actually benefit from a rising-inflation environment.”

The $320 million RSIC will look to allocate in the coming fiscal year represents a 1 percent increase from last year. Once it’s committed, infrastructure will comprise 3 percent of the South Carolina pension’s total portfolio.

“This is an allocation we’re going to be building for some time. We’re not going to be rushing this,” Berg said. The portfolio is still in the “design” phase, he added.

RSIC will split the 2018-19 infrastructure allocation between listed and unlisted commitments, but public equities investments are expected to eventually decline, according to Berg. He explained that RSIC began its infrastructure portfolio with commitments to public markets to build liquidity that can be called down to private structures.

“We’re going to have a certain amount of infrastructure, but we don’t control the pace at which private infrastructure firms call that capital. We’re really targeting an overall exposure to a combination of public and private,” he said.

Along with RSIC’s private infrastructure build-out, the investment commission approved a $125 million commitment to Digital Colony Partners, a $3 billion joint fund being raised by Colony NorthStar and Digital Bridge to invest in communications infrastructure. However, Berg said that allocation was made from the pension’s private equity portfolio.