Pantheon Chosen
Orange County selected Pantheon based on performance, price, access to successful private-equity firms and the ability to customize portfolios, according to a memo from Miller to the pension’s investment committee.
“We did not want this to simply become a naive low-bid contest focused predominantly on price at the expense of total expected risk-adjusted returns,” he said in the memo.
Pantheon, which oversees more than $25 billion in private- equity assets, will charge fees on the amount of money the pensions invest rather than the amount of money committed, as is customary.
Retirement systems that commit to the Pantheon fund before a September closing will be eligible for discounts, according to the memo.
One challenge for the venture is that individual pension funds have their own constituencies and may find it difficult to give up control, said Fann.
Decision Process
“When you introduce that level of complexity on the decision-making side, it’s hard to figure out whether they’ll be able to be like-minded,” Fann said.
Investments in alternative assets, which are harder to value and sell, more than doubled to 24 percent of public pension portfolios from 2006 to 2012, according to Cliffwater LLC, a Marina del Rey, California-based firm that advises institutional investors.
Pantheon’s USA Fund VII, a $2.3 billion fund-of-funds formed in 2006, returned 4.7 percent annually for the five years ending June 30, according to an annual report from the South Carolina Retirement Systems, which invests in the fund. The S&P 500 returned 7 percent in the same period.