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PERS private equity program posts long‑term gains; managers cite co‑investments and secondaries
Summary
PERS staff and managers told the Investment Committee the private equity program remains a top performer with long‑term net IRRs in the mid‑teens and a 1.7x–2.0x total value to paid‑in capital; managers emphasized co‑investments, secondaries and middle‑market focus amid subdued deal activity.
Jason Clark and Callan staff introduced presentations from Grosvenor Capital Management and Pathway Capital on Mississippi PERS’s private equity program and recent activity.
Jason Clark said private equity represents 10 percent of the pension fund’s target allocation and currently sits about 11.4 percent of assets; the program uses two fund‑of‑one managers and nine fund series dating back to 2008. "On a net internal rate of return basis we are at roughly the mid‑teens and about a 1.7x to 2.0x multiple life‑to‑date," Jason Clark said during introductions.
Grosvenor representatives (Tom Rest, Lee Brashear and Mark Roman) reviewed firm capacity and a case study on an investment that materially increased cash flows through operational improvements and private‑label contracts. They highlighted co‑investment activity and manager team stability.
Pathway partners Canyon Liu and Brian Nelson gave a detailed portfolio update. Pathway reported a net IRR of 15.8 percent and a total value to paid‑in capital of roughly 2.0x for the combined series; since inception distributions exceed contributions in recent years and the program has been cash‑flow positive since 2021. Pathway noted that direct equity (co‑investments) and secondaries have been additive to returns, with direct equities and secondaries posting returns in excess of 20 percent since inception in the Pathway account.
Pathway and Grosvenor pointed to specific exits and distributions. Pathway identified several recent M&A and IPO exits; highlights included a large IPO (Circle Internet Financial) that Pathway said generated a roughly $83 million gain for the Mississippi portfolio on a small initial position, and other M&A exits with multiples ranging from about 1.9x to over 10x on individual deals. GCM and Pathway also described a Falfurrias (Falfurrias) investment—Sour Brands (Duke's Mayo)—that produced a double‑digit multiple and a six‑year holding period from investment to exit.
Managers discussed the current market: fundraising and deal activity have been subdued after pandemic and 2022 volatility but show recovery signs; middle‑market buyouts and secondaries present opportunities given overcapitalization at the large‑cap end. Managers reiterated typical private‑equity timelines: primary investing and value creation occur in years 1–7, with distributions concentrated in years 5–10 and final wind‑down sometimes in years 12–15.
Why it matters: The private equity portfolio has materially contributed to long‑term returns for the pension fund, and staff and managers want to sustain allocations while using co‑investments and secondaries to manage fees and liquidity.
Less critical details: Pathway reported that co‑investments added about $58 million in fee and carried interest savings for PERS historically; the 2025 series increases secondary allocation target from 5 percent to up to 15 percent per staff direction.
