Mississippi Retirement Bolsters Real Estate, PE Portfolio
The Mississippi Public Employees’ Retirement System, which manages $34 billion in assets, approved new investments in its private equity and real estate portfolios at its most recent board meeting.
The $3.9 billion private equity portfolio was launched in 2006 with a 5% target allocation worth approximately $1.5 billion at the time. The official launch, however, occurred in 2008 with Pathway Capital Management and Credit Suisse Custom Funds Group, acquired by Grosvenor Capital Management in 2013.
In 2022, the private equity target allocation was increased to 10%. In considering a new series for 2024 for the GCM Grosvenor mandate, Mississippi was able to negotiate a five-basis point reduction in annual base manager fees for the primary investments, as well as co-investment commitments totaling 10% of the approved $360 million allocation. The goal will be fulfilled over three years, rather than five years as in previous years.
Seven of the 20 value-add real estate funds now funded by the pension system are in the process of closing or will do so within the next year, according to Jason Clark, the pension fund’s portfolio manager. Six of the funds are selling assets in the liquidation stage of their lifecycle, while the other seven are still in the investment or value-add phase, he said.
The board approved a $75 million commitment to Heitman Fund VI, a value-add real estate fund.
Mississippi pension, which has previously invested in Heitman Capital Management funds, sees the strategies as complementary to its $2.9 billion real estate portfolio because they invest in both traditional and differentiated property types. HVP III received a $50 million commitment in 2013, HVP IV received $50 million in 2017, and HVP V received $75 million in 2020.
According to meeting materials, the sixth offering will invest in a variety of property types to create a diverse portfolio with significant exposure to specialty properties. The goal is to provide risk-adjusted returns of 12% to 14%, net of expenses.
The modifications follow a first quarter in which the private equity composite return was 1.5% and real estate lost 2.8%. Overall, the investment portfolio increased by 4.6% gross of fees in the first quarter of 2024.
Hear from leaders in real estate capital raising, including Loci Capital managing principal Casey Wilson at the Connect Money: Real Assets Capital Raise event on June 5 in Chicago at the W City Center.