Allstate rolls out emerging manager program

 The Northbrook, Illinois-based insurance company has selected Customized Fund Investment Group to oversee the new mandate to invest with smaller private equity and real estate managers, particularly those run by ethnic minorities or by women.   

Allstate Corporation has launched its first emerging managing program, which will invest with small private equity and real estate asset managers focusing on ethnic minority- and women-owned firms. The insurer has hired Customized Fund Investment Group (CFIG) to oversee the initiative, through which Allstate intends to commit up to $100 million in emerging managers over the next three years.  

CFIG, which was formerly part of Credit Suisse Asset Management and acquired by Grosvenor Capital Management this summer, will be charged with identifying US managers that are raising their first, second or third institutional funds and have less than $500 million in assets under management. Also, qualifying firms should be at least 33 percent owned or controlled by women or ethnic minorities, or pay out at least 50 percent of its fund’s carried interest to women or ethnic minority staff.

Allstate first told PERE of its intentions to establish an emerging manager program in May 2012 and have the initiative up and running by the end of the year. The insurer then was in the process of selecting a manager to oversee the mandate, and already had shortlisted CFIG, which manages $200 million of the Teacher Retirement System of Texas’ $500 million real estate emerging manager program, as well as JPMorgan, the investment bank. Allstate had spoken with a total of 15 managers before narrowing the pool to three finalists.

Edgar Alvarado, Allstate’s group head of real estate equity, said the launch of the program took longer than expected. “We wanted to make sure that this is long-term viable program, we wanted to have support at the corporate level,” he said. “While there are investment concepts embedded in this, such as wanting a better return and supporting emerging managers, there were other objectives for the corporation as a whole that they wanted to accomplish.”

A number of public pension plans, such as the Teacher Retirement System of Texas, California Public Employees’ Retirement System and New York State Common Retirement Fund, have established emerging manager programs. But such an initiative among private pension plans – and in the insurance industry in particular – is a rarity. “We believe Allstate is leading the insurance industry in establishing this emerging manager investment program,” said Alvarado. 

In 2012, Allstate had anticipated making capital outlays of $5 million to $10 million each to 10 to 20 emerging managers through the new program, although such specifics have not yet been finalized. Each manager in the program will execute investments that meet Allstate’s risk-return profile for its private fund investments, which typically are in the mid-teens.

The insurance company has been investing in real estate for more than 20 years, including in commingled funds, co-investments, joint ventures and separate accounts. Additionally, Allstate invests in buyout, mezzanine, distressed and growth capital private equity funds. Its investment portfolio totaled $80.48 billion in assets under management as of September 30. Of that amount, Allstate's total real estate equity portfolio represents $3.4 billion of investments in real estate funds, co-investments, joint ventures and separate accounts.