Connecticut Doubles Down on Private Markets to Drive Growth | LP Deep Dive

What's New:

Connecticut’s Investment Advisory Council unveiled its 2025 private markets pacing plans, projecting $6.75 billion in new commitments across private equity, real estate, private credit, and infrastructure. These plans, presented during the January 22, 2025 meeting, aim to align the Connecticut Retirement Plans and Trust Funds (CRPTF) with strategic long-term asset allocation targets, ensuring steady growth despite market challenges.

Why It Matters:

The pacing plans are critical to ensuring consistent growth across private equity, real estate, private credit, and infrastructure. With a CRPTF portfolio valued at $59.5 billion (as of Q3 2024), these targeted investments aim to deliver strong returns while addressing market volatility and evolving asset class dynamics.

Big Picture Drivers:

• Strategic Goals: Achieving allocation targets of 15% for private equity, 10% for real estate, and 10% for private credit by 2028.

• Market Adaptation: Navigating high interest rates and liquidity constraints through focused investment strategies.

• Selective Partnerships: Expanding commitments to proven managers while introducing new ones to enhance diversification and performance.

• Economic Resilience: Prioritizing non-cyclical, value-driven sectors to mitigate risk.

Projected cash flows reveal a pivotal shift in 2028 as distributions surpass capital calls, signaling sustainable portfolio growth.

By The Numbers:

• 2025 Commitments: $2.85B to private equity, $1.85B to private credit, $1.35B to real estate, $850M to infrastructure.

• Growth Rate: Assumes a 4% annual net growth for CRPTF, balancing contributions, returns, and distributions.

• Unfunded Commitments: Estimated at $11.8B for 2025, ensuring capital availability for long-term objectives.

• Projected Net Cash Flow: Turning positive by 2028, with net inflows of $2.1B.

Key Trends to Watch:

1. Private Equity Expansion: Increased exposure to small/mid-market buyouts and growth equity, particularly in the U.S. and Europe.

2. Real Estate Shifts: A focus on non-core investments like data centers and senior living facilities, complemented by core asset rebalancing.

3. Infrastructure Focus: Prioritizing core infrastructure investments in under-competitive sectors.

4. Sustainable Investing: Strengthening ESG oversight through updated policies and proxy voting strategies.

The Wrap:

Connecticut's IAC is set to leverage disciplined pacing plans to achieve its ambitious 2025 goals, balancing growth, diversification, and risk management. With a focus on private markets, these strategies position the state for long-term financial resilience.

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