TALLAHASSEE, Fla. -- The $102 billion State Board of Administration of Florida plans to hire an international private equity manager and a fund of funds manager in the next six to nine months.
Bill James, new chief investment officer for alternative investments, said the board already has begun due diligence.
"Although we have been investing in private equity since 1988, we have had no exposure to international private equity," Mr. James said. Some 3.2% of total assets are committed to private equity, with 2.4% to 2.5% invested.
"We are allowed to have 1% to 4% of assets invested in private equity," he said.
In November, Florida's board of trustees approved the system's request to create a new class for alternatives that would be broader in scope than the existing one, which is limited to private equity.
Mr. James, previously the system's chief operating officer, said his position was added "so we wouldn't miss (investment) opportunities because something didn't fit into private equity or public markets."
Under the new structure, a staff of six -- including four investment professionals -- will work on alternatives.
Mr. James emphasized it is difficult for public funds to recruit talented portfolio managers. Florida's goal is to develop a pool of senior- and junior-level portfolio managers so there will be managers available to work on different portfolios as needed.
There are no immediate plans to diversify the alternatives portfolio beyond international private equity.
"But we will look at some other alternative asset classes from a research standpoint and in terms of what we're allowed to do legally," Mr. James said. "We are mostly reviewing non-domestic buyout funds and smaller vehicles through funds of funds."
The system now is invested in 15 private equity partnerships, primarily core buyout funds. Some may have a venture-cap component, but venture cap is not an area on which Florida is focusing. Nor is it considering other alternative classes such as private placements or distressed debt.
Hedge funds aren't on the radar screen just now either, but Mr. James and his staff will research them to see if statutory changes would be needed for the system to invest in them.
Real estate is a separate asset class at the system, comprising 4% of assets. It is not affected by the changes in the alternatives program.
In another area, Mr. James said the possibility of a defined contribution option will come up for a vote again at the next session of the Legislature.
"Should it pass, it could eventually replace the defined benefit program, which would impact the whole plan. In that event it would be better not to have a lot of illiquid assets such as private equity or real estate, because you usually don't find them in defined contribution plans," he said.