The state is preparing to launch a co-investment program with Morgan Stanley and HarbourVest, according to Connecticut State Treasurer Shawn T. Wooden.
The treasurer has recommended to the state”™s Investment Advisory Council (IAC) $150 million each to the Connecticut Co-Investment Fund and the Connecticut Private Debt Fund over an initial three-year commitment period with HarbourVest Partners.
HarbourVest is a private markets investment management firm with more than $80 billion of assets under management. The Connecticut Co-Investment Fund it would manage will allow the Connecticut State Retirement and Trust Funds (CRPTF) to participate in co-investment opportunities generated from private equity managers within the CRPTF portfolio as well as those accessed through HarbourVest”™s extensive network of general partners.
HarbourVest anticipates that the CT Private Debt Fund would make 16 to 18 co-investments per year. The Fund will be structured as an evergreen vehicle, which would allow the CRPTF to continue to allocate capital for private credit co-investments beyond the Fund”™s initial three-year commitment period.
“HarbourVest has established a leading position in the co-investment market, with an extensive and experienced team that has led more than $13 billion of co-investments since 2004 while developing expertise in managing customized co-investment programs for several large public plans,” said Wooden. “Through the Connecticut Private Debt Fund, the CRPTF will be able to capitalize on co-investment opportunities generated from its private credit fund managers as well as co-investments sourced through HarbourVest”™s private credit platform.”
In addition, the treasurer presented to the IAC an investment partnership with Morgan Stanley Investment Management (MSIM) of up to $125 million over three years involving the real asset portfolio of the CRPTF.
The CRPTF looks to initially invest $75 million to $100 million within real estate and $50 million to $75 million within infrastructure and natural resources annually. The Fund does not have any specific targets for sub-sector exposures but will maintain a focus on diversification.
The MSIM partnership will allow the CRPTF to co-invest in private real assets transactions managed by the MSIM Solutions Team operating within a publicly traded global financial services and asset management firm with more than $1.5 trillion of assets under management.
Finally, the IAC received a presentation of the Domestic Equity Fund restructuring plan, the results of the small cap RFP, and plans for improving returns through active management in inefficient areas of the domestic equity market.
Paul Osinloye, Principal Investment Officer for Public Equities, presented the finalists: Riverbridge Partners, LLC Lord Abbett & Co; Ariel Investments, LLC; Channing Capital Management, LLC; and Wellington Management Company. The DEF is focused on the U.S. domestic equity market that is benchmarked against the Russell 3000 Index, which encompasses the entire capitalization spectrum of the U.S. public market.
“Right now, the Domestic Equity Fund is mostly invested in large cap equities, which is a very efficient segment of the market. By putting active management in these less efficient areas of the domestic equity market, it gives us a greater potential rate of return relative to the market,” Wooden said.
The treasurer will announce his investment decisions on the aforementioned managers during the next regularly scheduled Investment Council Meeting.
