Mississippi reports loss of over 5% in PE portfolio

Public Employees’ Retirement System of Mississippi‘s private equity portfolio fell in value by more than 5 percent the past three months.

LPs have braced themselves for markdowns as private market valuations lag public markets, which have plummeted, by several months. However, many public pension systems have reported flat or even positive quarterly returns on private equity, which have been called into question for their accuracy.

The $29.4 billion system’s private equity portfolio dropped by 5.34 percent as of the end of September, according to a presentation by adviser Callan made at Mississippi’s October 24 board meeting. Buyouts reviewed the presentation.

Mississippi’s private equity program consists of fund of funds managed by Pathway Capital Management and GCM Grosvenor.

According to the presentation, the system first invested in Pathway Private Equity Fund XXIII in 2008 and placed additional commitments in 2013, 2016 and 2021. Mississippi made its first commitment to Grovesnor Diversified Partners in 2009, along with commitments for series in 2014 and 2018.

Mississippi committed $950 million to Pathway’s 2016 series. According to Callan, the 2016 vintage now stands at $1.25 billion in value, but generated a loss of 5.42 percent net of fees over the past quarter.

The system committed $700 million to Grovesnor’s 2014 vintage, which has earned 20.38 percent over the past five years and 19.8 percent over the past 12 months. Over the past three months, the 2014 vintage lost 2.5 percent in value, according to Callan.

Callan says the system’s private equity portfolio gained 5.52 percent over the past 12 months, even with a significant quarterly loss.

According to the presentation, Callan projects private equity to return 8.5 percent in 2023.

“Buyout valuations appear reasonable while venture/growth equity valuations are high. We see tremendous disparity between the best and worst performing private equity managers,” Callan wrote.

Mississippi currently allocates 13.1 percent of its total fund to private equity, according to the presentation. The system recently upped its target allocation to 10 percent.