Washington OKs More than $2 Billion in Private Commitments

The Washington State Investment Board is continuing its large allocation to private markets as it continues to place large bets on alternative investments.

The Washington State Investment Board (WSIB) has approved up to $2.05 billion in new private market commitments, shows a news release from the pension organization.

Real estate saw the largest commitments, $1.25 billion, followed by up to $450 million for private equity, up to $100 million for tangible assets, and up to $250 million for the system’s Innovation Portfolio.

In real estate, Aevitas Property Partners received $500 million and a second venture, Partners Enterprise Capital Holdings, received another $500 million. A third firm, Calzada Capital Partners, received $250 million.

Aevitas is based in Amsterdam and invests in real estate located in Europe, Africa, and India. The venture was formed in 2012. WSIB has previously invested $250 million in Aevitas in 2012, and $500 million each in 2014, 2016, and 2017.

Partners Enterprise Capital Holdings is based in Chicago. WSIB has committed more than $4 billion to the real estate venture beginning in 1999. The third firm, Calzada Capital Partners, is also based in Chicago. The real estate firm manages $4.075 billion for WSIB, not including the new $250 million commitment.

The Washington State Investment Board has one of the largest and most unique real estate portfolios among public pension systems in the US. Its real estate portfolio totals $20.2 billion and makes up more than 18% the total plan assets of $109 billion.

The portfolio is unique because WSIB’s real estate investments are managed by captive companies, owned and controlled by WSIB. Traditionally, pension plans invest in commingled funds with other institutional investors or in separate accounts.

The biggest private equity commitment by WSIB, the release shows, is up to $250 million allocated to Madison Dearborn Capital Partners VIII. The fund will invest in middle and upper‐middle market companies located primarily in the US.

A second private equity investment is a $200 million commitment to Insight Partners XI. The fund will invest in software, enabled services, and internet businesses, primarily in the US and Europe.

Private equity is another large investment area for WSIB. The pension system’s $23.9 billion private equity portfolio is one of the largest in the United States and makes up almost 22% of WSIB’s total portfolio.

Percentagewise, it is around three times the size of the private equity portfolio of the largest US pension plan, the California Public Employees’ Retirement System (CalPERS).

In the tangible assets arena, WSIB has committed up to $100 million to Lime Rock Resources V. The fund, managed by Houston-based Lime Rock Resources, invests in oil and gas properties in the US. The fund has a target of $750 million. WSIB’s tangible assets portfolio is $5.5 billion.

WSIB also made a relatively large investment for its small Innovation Portfolio. It invested up to $175 million in GI Partners Data Infrastructure Fund. GI Partners has been best known for its real estate and private equity funds, but the new fund plans to make investments in data centers and related infrastructure. The fund has a target size of $1.25 billion. In addition, WSIB is committing up to $75 million in a co-investment vehicle, which will be managed by GI Partners.

The new commitments exceed total previous investments in the Innovation Portfolio. The portfolio, before the two commitments, only had a size of $162 million.

Real estate and private equity have produced particularly strong returns for WSIB. For the one-year period, ending Sept. 30, the real estate asset class produced returns of 13.43%. On a three-year basis, returns were 11.44%, on a five-year basis, returns were 11.5% and on a 10-year basis, returns were 11%.

Private equity returned 10.4% for the one-year period ending Sept. 30, 15.14% for the three-year period, 12.03% for the five-year period, and 14.17% for the 10-year period.

For the fiscal year, ending June 30, WSIB had overall returns of 8.36%.

Maintaining WSIB’s private market dominance will fall to the system’s new Chief Investment Officer, Alyson Tucker, starting in January. Tucker is replacing longtime CIO Gary Bruebaker, who is retiring at the end of December. Bruebaker was credited with successfully leading efforts to keep private market allocations high despite increased competition by other institutional investors for private market’s exposure.