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Private equity update: portfolio stabilizing, program above target but generating record cash flow
Summary
Staff reported a 2.9% return for SFERS private equity in 2024, a long‑term net IRR of about 16% since inception and that the private equity allocation stands near 28%, above the 20% target. The portfolio returned record net cash flow in 2024 and through mid‑2025.
SFERS staff told the retirement board that the private equity program has begun to stabilize after several difficult years for private markets.
Justin and the private‑equity team reported a 2.9% return for the program in 2024 and a net internal rate of return of roughly 16% since the program’s inception. Staff said the private equity allocation stood at about 28% of plan assets, above the board’s long‑term policy target of 20% (the plan reduced the prior target from 23% last year). That allocation reflects prior commitment pacing and the program’s cumulative distributions and re‑valuations.
Liquidity was highlighted as a positive: the private equity program generated about $324 million in net cash flow to SFERS in 2024 and roughly another $300 million through June 2025, staff said. Deployment continued at a measured pace — about $340 million across 12 relationships in 2024 — reflecting extended fundraising timelines and manager caution in the current cycle.
Staff discussed efforts to rebalance the portfolio’s mix of strategies and geographies — including shifting emphasis away from some ex‑U.S. venture exposure and toward more buyout and lower‑middle‑market opportunities — and said they were pursuing a programmatic co‑investment capability. To scale co‑investment, staff said they plan to partner with a third‑party execution provider rather than build a large in‑house execution team, citing the time and operational requirements for a consistent co‑investment program.
Board and staff also discussed near‑term initiatives including secondaries evaluation, co‑investment program design and continued focus on manager selection and portfolio construction to build resilience across cycles.
