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ASKING THE ALLOCATORS IAN SANDIFORD, SENIOR PORTFOLIO MANAGER – A LT E R N AT I V E S , B O R D E R T O C O A S T
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order to Coast Pensions Partnership, one of the largest pension pools in the UK, was established in 2018. It manages the investment of pensions assets of 11 Local Government Pension Scheme funds holding circa GBP55bn of assets How has your private equity investment strategy changed over the past year? The market as a whole is increasing exposure to alternatives and private equity however those with an established legacy portfolio have probably seen quite a strong run of private equity performance over the last 12-18 months so it’s possible that this might temper some investors’ allocations in the near term. While we have clear areas of investment focus, we’re tasked with delivering a broadly diversified portfolio and have therefore tempered our exposure to these key themes. We therefore haven’t experienced, and don’t anticipate, meaningful changes to our PE investment strategy, with continued appetite for tech and software, healthcare and pharma and Asia.
We aim to diversify our programme with some degree of real economy exposure and also have some exposure to special situations, in case of market downturn. How often do you allocate to emerging or first-time managers? As we’re a new programme, our current fund managers are all new relationships to some degree. Nonetheless, we have reviewed some new managers across private markets, and committed to second generation funds in our private equity and infrastructure programmes. Our overall programme does have a bias towards established managers – we don’t have a discrete pocket for new managers. What advice would you give to new fund managers in the current market? As well as not having a track record of returns, one of the challenges for newer funds is whether they have the institutional quality in terms of operational due diligence, so we’re very focused on making sure they have appropriate compliance procedures to manage things like valuations.
Another issue is that we are looking for fee discounts and, typically, a small manager with a single fund or on a second generation isn’t necessarily best placed to offer fee discounts, particularly if they’re trying to build out a team. Do you have any concerns about the current pace of fundraising? There are clearly concerns around access to high quality funds. With more people allocating to private markets, there’s more competition for access. Also, [we have concerns regarding] the size of funds that are being raised at the moment and what that means in terms of manager discipline, how that changes the alignment between managers or what they receive from management fees versus their dependence on carry. We’ve also seen some really fast deployment. While we don’t necessarily have concerns over the individual assets acquired by these managers, there are concerns around what this means for portfolio diversification, vintage diversification, and our ability to re-up with managers on a regular basis.
P R IVAT E E QU IT Y W IR E IN S IG H T R E P ORT
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