The $35 billion Victorian Funds Management Corporation (VFMC) made both its co-heads of private markets redundant last Tuesday, as it responded to clients who felt they were overweight private equity but underweight infrastructure.
The move is understood to have come as a complete surpise to Andrew Strachan and David Brown, who had recently returmed from an overseas trip meeting potential general partners, and had been telling managers as little as six weeks ago that they had board approval for $100-$150 million in new private equity investment for each of the next three years.
The chief executive of VFMC, Justin Arter, said that most of the manager’s Victorian public sector clients had requested higher exposures to infrastructure during triennial asset liability modelling reviews held late last year.
“They think infrastructure is best suited to match those long-term liabilities that they have. Our private equity investments have performed fantastically so clients are either at weight or overweight in that asset class,” he said.
“We’re a closed end fund, so we have to sell something to buy something. We’ve got enough private equity for now, so we didn’t need people going out and identifying potential new managers.”
He said VFMC would be searching for experienced infrastructure investors, to work with the head of that asset class, Andrew Best.
VFMC will continue to manage more than $1 billion of existing private equity investments. The remaining private markets team member, Alistair Wong, will be assisted in this by the rest of VFMC’s investment team, and will report to deputy CIO Andrew Elliott.
Responding to talk of a board push for VFMC to outsource private equity management altogether, perhaps to Industry Funds Management, Arter said there were no plans to go down the outsourcing road.