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Investment consultant outlines three allocation options as private markets wind down
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Summary
An external presenter laid out three long‑term allocation options for redeploying maturing private markets—ranging from a full shift into equities and bonds to mixes that include infrastructure or private debt—and stressed the need to balance liquidity and diversification as about 16% of the OPEB trust still sits in legacy private assets.
Patrick Wing, the meeting's investment presenter, told the St. Mary''s County OPEB trust committee that legacy private markets are winding down and offered three long‑term allocation options for the trust.
Wing said the trust's private real estate, private equity and private debt holdings now account for roughly 16% of the overall trust and that many private equity statements remain outstanding. "We had about $930,000 in net distributions coming back to the trust," Wing said, noting that returned capital improves liquidity as the legacy funds mature.
Why it matters: where the maturing private assets are invested will affect the trust's liquidity profile and risk exposure. Wing presented Option A (move private markets into U.S. equities and core bonds), Option B (shift some proceeds into infrastructure as well as equities and bonds) and Option C (a mix similar to B but that retains a modest private‑debt allocation). He said the analysis assumes ongoing net cash outflows (roughly $5 million per year in the model) to reimburse the county for benefit payments, which magnifies the importance of liquidity in allocation choices.
Wing summarized the projected outcomes from Monte Carlo simulations and stress tests. In directional terms, Option B generally offered better downside protection in severe equity shocks, while Option C was stronger in scenarios where fixed income performed relatively well. "When everything's doing poorly, equities drive the bus," Wing said, arguing that modest allocations to infrastructure or private debt can provide incremental protection compared with moving everything to public equities and bonds.
Board members pressed on practical constraints. Chair David Weiskopf and others emphasized the need to avoid increasing illiquidity as the board decides where distributions should be redeployed. John Walter requested additional detail on private debt; Wing said the board's due diligence targets external managers rather than underwriting each loan and described private debt that is "sponsored" by private‑equity buyers as the more conservative form the board would consider.
No formal decision was made. Wing framed the presentation as the start of a longer conversation: "This is very, very long‑term exercise," he said, and recommended additional analysis and a possible refresher on private debt at a future meeting.
The committee is scheduled to revisit final Q1 numbers and the broader asset‑allocation conversation at upcoming meetings; the next committee meeting listed on the agenda is June 26, 2026.
