By Muskan Arora

The
$56.2bn Connecticut Retirement Plans and Trust Funds committed up to $450m allocations
to its private investment fund portfolio, alongside tactical reallocation to
equities.

The
system will reallocate 2% of CRPTF’s portfolio to equities, which will be
executed in four stages.

“A
tactical reallocation process could initially use funds from the Liquidity
Fund, as well as funds from liquid asset classes like Core Fixed Income in
later stages,” said Nishant Upadhyay, Principal Investment Officer, and Jorge
Portugal, Investment Officer, in the recent meeting.

The
returns data show a strong performance for tactical reallocations after large
equity market drawdowns.

Combined
Core FI and RMS help when equities are doing well and can provide a positive
performance when equities are in a downturn.

Further
Ted Wright, the chief investment officer at the pension fund alongside
consultant Hamilton Lane, presented the board with the first investments to
secondaries and mezzanine strategies for 2024.

Commitment to secondaries strategy

The
pension plan committed up to $200m to Hollyport Secondary Opportunities IX
which focuses on acquiring secondary interests in private equity funds that are
generally past the original ten-year term.

“Essentially
as LPs and GPs are seeking liquidity solutions due to the backlog in private
equity access, and we would be able to capture maximum opportunities with this
differentiated strategy,” said Kan Zuo, investment officer at the pension fund.

The
recommended commitment would expand the CRPTF’s existing partnership with
Hollyport, which utilizes its demonstrated expertise with complex structures
and well-established reputation as a valued counterparty to generate attractive
investor returns.

The
system allocates 11.6% to long-term secondaries against a target exposure range
of 5% – 10%.

However,
a few threats noted by the staff include Hollyport’s substantial growth in size
may raise issues in deploying the capital effectively, alongside competition
and pressure from the growing secondaries market.

Commitment to mezzanine strategy

The
system makes commitment of $100m to Insight Partners Opportunities Fund II (Opps
II) and $150m to Insight Partners Opportunities Fund II Co-Investment Sidecar
(Sidecar).

Opps
II will primarily pursue minority, structured capital investments in mature,
growth-stage software companies located globally with a focus in North America.

Sidecar
will make co-investments in certain Opps II companies.

“The
preferred equity investment will sit in the middle of the capital stack between
existing debt capital and existing equity without diluting current equity
owners,” said Carmen Melaragno, investment officer at CRPTF

“This
strategy will provide both downside protection and the ability to participate
on the upside through equity conversion,” added Melaragno.

The
commitments will provide the CRPTF with additional exposure to a high-quality,
existing PIF manager providing differentiated, capital solutions to growing,
well-performing software companies.

These
are the fourth and fifth commitment of PIF’s 2024 allocations.

Justifying
allocation to these funds, the PIF has 2% exposure to mezzanine strategies
against a long-term range of 5% to 10%, as of December 31.

Further,
the system allocates 88% to corporate finance against a target of range of 70%
– 100%.