The investment staff of the Washington State Investment Board (WSIB) has committed up to $1.9 billion in new infrastructure, private equity, and real estate investments.
The new commitments come as the investment organization, which oversees pension plans for public employees and other state assets, continues to focus on private markets in the midst of the coronavirus pandemic. The large alternative asset allocation has helped offset stock market dips.
The investments were all made using the investment staff’s delegated authority, bypassing the necessity of approval by the board of WSIB. They were also made as part of a 2019-2020 investment plan by the pension organization to continue seeking large private market investments.
So far, the devotion to private markets this year seems to be paying off. WSIB reported $107.5 billion in assets as of March 31. The number is down around $7 billion from three months earlier on Dec. 31—but the reduction in assets is less than a third of the drop of other large plans pension plans.
WSIB has a much smaller equity portfolio that most of its state counterparts, around 33%, compared to the average 50% commitment. Given that, it has been less subject to the swings of volatile equity markets.
Instead, WSIB has among the largest private equity and real estate pension plan allocations in the U.S., more than 21% and 18%, respectively. Its tangible assets portfolio is a smaller 5.15%, but new actions by the investment board are showing a commitment to build that asset class.
An April 16 investment board memo shows that investment staff committed up to $700 million into the tangible assets asset class, with all the money going to one fund, Stonepeak Infrastructure Fund IV.
The fund is managed by Stonepeak Infrastructure Partners, a New York firm that specializes in North America infrastructure opportunities.
In addition to the up to $700 million, WSIB is also making a co-investment of up to $200 million in a separately managed account, Stonepeak Evergreen Partners.
The investment board has a long-term relationship with Stonepeak Infrastructure Partners. It has committed $250 million, $400 million, and $600 million, respectively, to Stonepeak’s three prior funds.
It also has had two prior co-investments with Stonepeak Evergreen Partners, the co-investment fund. The WSIB has previously committed a total of $250 million to Stonepeak Evergreen Partners in 2015 and 2017.
In private equity, WSIB committed $300 million to Francisco Partners VI. The private equity fund has a target size of $5.5 billion. The firm managing the fund, Francisco Partners, specializes in investments in technology and technology-enabled businesses.
Private equity makes up $24.4 billion of WSIB assets, as of Dec. 31, an amount only exceeded by one public pension in the U.S., the California Public Employees’ Retirement System (CalPERS). CalPERS, has more total assets than WSIB, yet its private equity accounts for less than 8% of the plan’s assets.
WSIB is one of the first pension plans to invest in private equity in the U.S. It has been able to maintain long-term relations with some of the world’s largest private equity firms at a time when competition is fierce among institutional investors for limited partner spots in funds launched by top-rated private equity organizations.
In real estate, WSIB announced that investment staff made a new $700 million to Crane Capital.
Crane is based in Hong Kong and is owned by WSIB, one of a series of U.S. and global real estate managers that work exclusively for the plan. In a unique arrangement, the captive real estate managers make up management of WSIB’s real estate portfolio.
The investment shows that WSIB is still bullish on Asian real estate markets at a time when the coronavirus has spooked other pension plans into making new commitments.
WSIB made an initial $250 million commitment to Crane in February 2019. It also transferred $400 million of existing commitments from another WSIB real estate intermediary, Evergreen Real Estate Partners, as part of seed money for the firm.
Crane says on its website that in invests in high-quality real estate opportunities in Asia’s leading cities. It does not name the cities.
The WSIB real estate portfolio is around $21 billion.
The new commitments come under the tenure of WISB’s new chief investment officer, Allyson Tucker. Tucker was previously head of the board’s Risk Management and Asset Allocation team. She took the CIO position on January 1, replacing Gary Bruebaker, who retired after nearly 20 years with WSIB.