Hartford HealthCare, Hartford, Conn., committed $65 million to Neuberger Berman Secondary Opportunities III, the first private equity commitment for the $1.8 billion pension and endowment fund, said David Holmgren, chief investment officer.
The Hartford HealthCare's policy committee approved creating a 6% private equity allocation at a meeting Wednesday. Neuberger Berman's selection came from a shortlist provided by investment consultant Mercer Hammond.
A secondary private equity strategy was selected first; commitments to direct limited partnership funds will be considered incrementally over the next four years, Mr. Holmgren said in a phone interview.
Private equity is a suballocation in Hartford HealthCare's 55% growth allocation, which also includes U.S. and international equities. Funding for private equity will come from rebalancing domestic and international equities, Mr. Holmgren said.
Currently, 26% of total assets are in U.S. equities, while 23% are in international stocks. Hartford HealthCare's remaining allocation is 35% risk reduced, which is hedge funds and fixed income, and 10% in inflation/economic-hedged assets, which includes real assets.
Separately, Hartford HealthCare is considering whether to add an illiquidity allocation to return its real-asset suballocation to its 8% policy target, Mr. Holmgren said. The portfolio currently is underweight by two percentage points, with U.S. equities similarly overweight the same amount.
“We've been concerned that the current environment was all monetary-driven inflation (and our existing inflation/economic-protected asset class really works in demand-driven inflationary environments). So what we're looking to do is broaden out the scope of the inflation protection to be more dynamic to the environment and move that 2% back into the class,” Mr. Holmgren wrote in an e-mail.
Mercer Hammond and Mr. Holmgren plan to recommend some illiquid real estate and illiquid natural resources funds by the summer. Funding would come from reducing other liquid managers' allocations within the class; no terminations are expected, Mr. Holmgren said in the interview.