Major investment changes are brewing at the Florida State Board of Administration.
The Tallahassee-based board, which oversees $102 billion in assets, is planning to make major allocations to alternative investments, including its first moves into hedge funds, infrastructure, timberland and corporate governance activism funds, plus investing in a general partnership management company.
Other areas under consideration are real estate debt funds and debtor-in-possession investment portfolios.
“The SBA continues to research new opportunistic alternative investments that have an attractive risk-adjusted return profile, as well as sticking to our discipline of maintaining a relatively even year-to-year pace for private equity fund commitments to avoid vintage year risk,” Ash Williams, executive director and chief investment officer, said in a statement. “Additionally, the SBA has relationships with a number of debt-oriented funds that have retained a healthy store of dry powder that we expect to be prudently invested over the next several years.”
Among other alternatives, the board recently committed $75 million each to VSS Structured Capital II and Falcon Strategic Partners III for distressed debt. The board could allocate still more to new distressed debt managers, said Dennis D. MacKee, FSBA communications director. “We are satisfied where we are (in terms of the allocation) but we are looking at things at the margin, even more opportunistic,” he said.
The investments are part of the FSBA's expansion of its strategic investments portfolio.
“We view it as an opportunistic asset class, the allocation a function of what investment opportunities present themselves,” Mr. MacKee said.
The board's allocation target for the strategic investments portfolio ranges from zero to 10% and now is about 3.5%.
Among its initiatives, board members are reviewing proposals for a hedge fund consultant and expect to make a decision on hiring one by the end of September. The consultant will help fund officials decide in what hedge fund strategies to invest, direct or funds of funds. The board could decide on an allocation and the source of the funding by the end of the year, Mr. MacKee said.
Board members haven't yet decided on allocations to infrastructure, timberland or corporate governance, although decisions are expected this year.
Fund officials are in preliminary discussions with a half-dozen money managers to study infrastructure and could make a decision on whether to make an allocation and with which firms late in the fourth quarter, Mr. MacKee said. The identities of the firms were not available. He characterized the discussions as “very preliminary.”