Dec. 14, Board of Trustee Meeting/Let's keep score: Good- 5 pt. Bad- 0 pt. Ugly -5 pt.

 

At the December CTPF board meeting, Fernando Vinzons CIO, made a board action request to approve $10 million with Farol Asset Management Fund III.  Why? 

 In 1996, CTPF began its private equity portfolio. The trustees, investment staff, and consultants agreed to follow a disciplined approach to implementing this investment vehicle. They conducted an annual pacing study which is based on a refreshed total plan, private equity portfolio cash flows, and valuations. Before making any investment commitment, full due diligence will be conducted, and successful legal negotiation will be carried out.

During the February 28, 2023 meeting, Gary Robertson, the Senior Vice President private equity consultant from Callan, provided an update on the private equity commitment pacing study. The study outlined the expected model commitment over 10 years. The portfolio is planned to be diversified by investment vehicle implementation, including 46% Fund-of-Funds, 43% Direct investment with MWDBE managers, and 11% Direct investment with Developed managers. Additionally, strategy-type diversification includes 8% Special Situations, 10% VC/Growth, 42% Mid/Small Buyouts, and 40% Large Buyouts. Geographically diversified investments include 1% in Emerging Markets, 10% in developed non-US, and 89% in the US. Robertson suggested reinvesting with five specific managers.

On December 14, 2023, I submitted a FOIA request, hoping to receive a full investment due diligence on the manager.  Unfortunately, I did not receive what I was expecting, which left me with even more questions, for starters, what is the opportunity cost associated with this plan and predetermined managers?

Reasons Warren Buffet advises public pension to beware of private equity, “little supply of great business to buy”, the reputation of private equity manager, is “typically very dishonest” and “it requires a very high level of expertise”. 

1.     KKR XIV named for the Developed Manager https://www.buyoutsinsider.com/kkr-is-expected-to-launch-next-flagship-fund-later-this-year-adviser/

2.     Mesirow IX-B Developed Manager Co-investment chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.sec.gov/files/litigation/admin/2022/34-95351.pdf

3.     Farol III Direct Minority Women Disadvantage Business Enterprise (MWDBE)  https://pitchbook.com/profiles/fund/22718-17F#overview

4.     NMS V (MWDBE)   https://pitchbook.com/profiles/fund/18215-56F#overview

5.     Turning Rock II (MWDBE)   https://www.prnewswire.com/news-releases/turning-rock-partners-closes-fund-ii-301599106.html