Large public pensions are always on the lookout for new talent and smaller managers, and the CIOs of four large pension systems recently shared advice to firms looking to break in.

The CIOs of the $151 billion Florida State Board of Administration, the $150 billion Teacher Retirement System of Texas, the $120 billion New York State Teachers’ Retirement System, and $28 billion Texas Employees’ Retirement System discussed their approaches to finding new managers at Texas Teachers’ annual emerging manager conference on February 7.

While each pension fund had its own policies, some common themes that emerged included the importance of specialization, the need for patience, and a sharp focus on returns.

All four CIOs said emerging managers need to punch above their weight if they’re going to catch a pension fund’s attention.

“It’s well-established in the academic literature that small or newer managers, for whatever reason – hunger, motivation – tend to produce some pretty persistent alpha over the years,” Florida SBA’s Ash Williams said.

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Blackstone Group’s private equity head, speaking at a recent Oregon pension meeting, said the frenzy for middle-market private equity deals has made the larger end of the market relatively more attractive than ever.

While many LPs are skeptical of megafunds’ ability to continue to provide top-tier returns, Blackstone’s Joseph Baratta said many “unloved” large companies or overlooked divisions of companies are good bets for the type of operational improvements that only a firm like Blackstone can provide.

“We think that the large end of the market is relatively more attractive today than it has ever been,” Baratta said.

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While many investors are frustrated with high prices on secondary private equity assets, Commonfund still sees value in overlooked corners of the market.

The market for secondary transactions, which Evercore recently reported grew a third to $72 billion in 2018 from $54 billion in 2017, is playing an increasingly important role in investors’ PE strategies. Commonfund, which manages $24.1 billion in endowment and foundation assets, tries to stay a step ahead by looking for opportunities in venture capital, emerging markets, and other areas where competition is less heated and prices are lower.

Check out the full article, as published by Buyouts: https://bit.ly/2KlVoUA