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Florida pension ups private equity allocation

The $97bn pension, which has lost about $30bn since the end of June, increased the upper limit of its target private equity allocation to account for the denominator effect.

Florida’s public employee pension fund has increased the upper limit of its private equity allocation to 7 percent from 5 percent to balance its portfolio as the value of the fund has dropped by $30 billion since the end of June.

The Florida Retirement System has suffered from the “denominator effect”, in which the plummeting value of an investor’s public equity holdings causes its actual private equity allocation to increase as a percentage of the fund’s overall assets under management.

The pension’s actual allocation to private equity stood around 4.4 percent as of 30 October, bumping against the fund’s previous private equity ceiling of 5 percent, a spokesman for the pension said.

“This gives us some breathing room,” the spokesman said.

The overall value of Florida’s state pension plan has dropped by about $30 billion since 30 June, when it totaled $126.9 billion. The fund’s current value is roughly $97 billion, the spokesman said.

The Florida State Board of Administration, which governs the pension, made the changes Tuesday.