State of Wisconsin Investment Board, Madison, plans to start an internally managed private equity co-investment program, possibly sourcing and screening investment opportunities from its existing general partner relationships, according to a report of the board, which oversees $98.2 billion.
SWIB is targeting the program's startup for the first quarter of next year.
To help implement the strategy, the board is searching for an investment professional who would be responsible for establishing, building and managing the internal private equity co-investment program.
The “program presents an opportunity to manage additional assets internally, without paying a management fee and performance fee to a private equity fund sponsor,” Michael Williamson, executive director, told the board, according to the report.
Scott Parrish, portfolio manager-private equity, in a presentation said the potential fee savings on a $100 million commitment is $24.2 million over five years.
SWIB hasn't decided its target allocation to the co-investment program, Vicki Hearing, SWIB public information officer, said in an e-mail. SWIB has $6.1 billion in private equity and debt, according to the report.
Private equity co-investments have performed better than limited partnership funds, Mr. Williamson said, according to the report.
A research analysis, “Private Equity Co-Investments: Historical Performance and Strategy Opportunities,” by John Drake, SWIB managing analyst-private equity, examining 231 co-investments from existing general partners found “the average co-investment outperformed the fund it came from 72% of the time and only underperformed 17% of the time and met or exceeded top-quartile fund returns in every period reviewed,” the report said.
SWIB hasn't had a co-investment program since an equity and mezzanine co-investment partnership with Northwestern Mutual Life relationship was discontinued in 2011, said Mr. Parrish, according to the report. In addition, SWIB operated an internally managed co-investment program from 1986 to 2003.
SWIB hasn't decided what structure the co-investment program will take, such as investing alongside existing private-equity relationships, or the role of StepStone, SWIB's private equity consultant.
SWIB is still accepting applications for the investment professional, a process that was scheduled to close May 31. Qualifications SWIB is seeking include eight years of investment experience, including a preference for private equity co-investment experience. SWIB will continue to accept applications until the position is filled, Ms. Hearing said. The opening is posted at the board's website.