Key Takeaways
- • Bain & Company describes a case study in which a global pension fund, referred to as PensionFundCo, nearly tripled its private equity allocations after engaging the firm.
- • Before the engagement, PensionFundCo had invested on average about 5% of its capital in private equity over the prior five years, and its pace of PE investment had been slowing.
- • The fund's new strategy targets midmarket limited partnerships and combines funds, coinvestments, and secondaries to work more effectively with general partners.
- • The fund now reports its PE allocation at more than 10% of cumulative net cash flow and asset value as a percentage of total fund value, according to Bain's account.
- • Bain's engagement also reshaped PensionFundCo's operating model, adding a commitment pacing model to anticipate cash flows to and from PE investments.
Summary
Bain & Company published a case study describing its work with a global pension fund, which it refers to as PensionFundCo. The firm's client name has been changed for confidentiality, though Bain states that the reported results are real. Historically, PensionFundCo invested across public equities, real estate, and assets tied to the region where its contributors live and work. In the five years before engaging Bain, it had allocated on average only about 5% of its capital to private equity, and its board was skeptical that a larger outlay would produce meaningful results.
Bain began with benchmarking analysis, measuring PensionFundCo against comparable funds in terms of their PE allocations, returns, and success factors. According to the case study, this analysis showed that consistent private equity returns would require the fund to scale up its investments and define a differentiated strategy. Bain then mapped the universe of options across three dimensions: geography, asset class, and participation model. Each option was evaluated against two priorities: attractiveness, meaning strong returns and the ability to deploy significant capital, and alignment with the fund's existing capabilities.
Following Bain's recommendations, PensionFundCo decided to nearly triple its PE allocations, targeting midmarket limited partnerships. Its strategy combines fund commitments, coinvestments, and secondaries. To support the shift, Bain examined the fund's operating model, identified capabilities to add or enhance, and advised on team design and internal governance, presenting leadership with choices weighed by cost and returns over time.
According to Bain, these changes allow PensionFundCo to deploy capital into private equity at a scale that supports more continuous redeployment. A new commitment pacing model helps leaders anticipate future cash flows. The fund now reports a PE allocation of more than 10% of cumulative net cash flow and asset value as a percentage of total fund value, which Bain says has helped the fund balance liquidity and growth. Note that this account is a consultant-authored case study and the figures are as reported by Bain, not independently verified.
Bain began with benchmarking analysis, measuring PensionFundCo against comparable funds in terms of their PE allocations, returns, and success factors. According to the case study, this analysis showed that consistent private equity returns would require the fund to scale up its investments and define a differentiated strategy. Bain then mapped the universe of options across three dimensions: geography, asset class, and participation model. Each option was evaluated against two priorities: attractiveness, meaning strong returns and the ability to deploy significant capital, and alignment with the fund's existing capabilities.
Following Bain's recommendations, PensionFundCo decided to nearly triple its PE allocations, targeting midmarket limited partnerships. Its strategy combines fund commitments, coinvestments, and secondaries. To support the shift, Bain examined the fund's operating model, identified capabilities to add or enhance, and advised on team design and internal governance, presenting leadership with choices weighed by cost and returns over time.
According to Bain, these changes allow PensionFundCo to deploy capital into private equity at a scale that supports more continuous redeployment. A new commitment pacing model helps leaders anticipate future cash flows. The fund now reports a PE allocation of more than 10% of cumulative net cash flow and asset value as a percentage of total fund value, which Bain says has helped the fund balance liquidity and growth. Note that this account is a consultant-authored case study and the figures are as reported by Bain, not independently verified.
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