Key Takeaways
- • The City of Milwaukee Employees' Retirement System (CMERS), a $6.7 billion pension fund, is preparing to pause new private equity commitments in 2027 as part of a long-term de-risking strategy, according to board materials for the Annuity and Pension Board's Sept. 24 meeting.
- • Private equity accounted for approximately 12.1% of the portfolio as of Aug. 31, about $810.3 million, above its 11% target allocation.
- • CMERS aims to reduce its private equity allocation to approximately 4% by 2035 through a glidepath that avoids forced sales of existing holdings.
- • Investment consultant Callan recommended no new private equity commitments in the coming year, with pacing to be reviewed annually; the proposed 2027 pause follows a similar pause on new reinvestments in 2026.
- • The program ranked in the second quartile for performance, with two core managers holding about 76% of the program and two specialty managers holding 24%.
Summary
The City of Milwaukee Employees' Retirement System (CMERS) is preparing to pause new private equity commitments in 2027 as the $6.7 billion pension fund reduces its exposure to the asset class. The recommendation is included in materials for the Annuity and Pension Board's Sept. 24 meeting and follows a private equity pacing review by investment consultant Callan, which recommended making no new commitments during the coming year. The decision will be revisited annually as the fund moves toward a lower allocation.
Under the fund's de-risking glidepath, CMERS aims to reduce its private equity allocation to approximately 4% by 2035. The strategy is intended to gradually lower portfolio risk as the fund's funded status improves, rather than requiring an immediate sale of existing holdings. As of Aug. 31, private equity represented roughly 12.1% of the portfolio, above its current 11% target, and was valued at approximately $810.3 million according to the board materials. The proposed pause would allow net asset value to decline gradually as existing investments mature and distributions are returned to the fund.
The recommendation comes despite relatively strong longer-term results. Callan reported that the private equity program continued to rank in the second quartile for performance. The portfolio is spread across four managers: two core managers account for approximately 76% of the program and provide broad private equity exposure, while two specialty managers represent the remaining 24%, adding liquidity and exposure across different company sizes. The fund's private equity managers include Abbott Capital Management, Mesirow, Neuberger Berman and Apogem Capital.
The proposed 2027 pause follows a decision to make no new private equity reinvestments in 2026, also tied to the de-risking strategy. Callan said commitment pacing would continue to be reviewed annually to determine whether additional investments are warranted. The private equity allocation remains above the fund's long-term target as it works toward a more conservative investment mix.
Under the fund's de-risking glidepath, CMERS aims to reduce its private equity allocation to approximately 4% by 2035. The strategy is intended to gradually lower portfolio risk as the fund's funded status improves, rather than requiring an immediate sale of existing holdings. As of Aug. 31, private equity represented roughly 12.1% of the portfolio, above its current 11% target, and was valued at approximately $810.3 million according to the board materials. The proposed pause would allow net asset value to decline gradually as existing investments mature and distributions are returned to the fund.
The recommendation comes despite relatively strong longer-term results. Callan reported that the private equity program continued to rank in the second quartile for performance. The portfolio is spread across four managers: two core managers account for approximately 76% of the program and provide broad private equity exposure, while two specialty managers represent the remaining 24%, adding liquidity and exposure across different company sizes. The fund's private equity managers include Abbott Capital Management, Mesirow, Neuberger Berman and Apogem Capital.
The proposed 2027 pause follows a decision to make no new private equity reinvestments in 2026, also tied to the de-risking strategy. Callan said commitment pacing would continue to be reviewed annually to determine whether additional investments are warranted. The private equity allocation remains above the fund's long-term target as it works toward a more conservative investment mix.
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