HRJ passes ball to Probitas
Troubled fund of funds manager HRJ Capital has retained secondary intermediary Probitas Partners to help it unload stakes of its funds of funds on the secondary market, according to sources familiar with the situation.
Probitas and HRJ declined to comment.
The hiring of Probitas comes a couple of months after it was revealed that HRJ was unable to repay a $68.9 million warehouse loan from Silicon Valley Bank. HRJ used the loan to fund certain outgoing LP commitments. Silicon Valley Bank suggested in a regulatory filing that it may assume control of HRJ and earn related fees and carried interest to help it retire the debt. However, with the hiring of Probitas by HRJ, it seems Silicon Valley Bank is no longer enamored by that idea.
If Probitas is successful with the secondary sale, HRJ would use the proceeds to pay back the SVB loan. Under that scenario, sources say HRJ presumably would remain an ongoing concern, managing funds not related to the loan.
HRJ was formed in 1999 by former San Francisco 49ers players Harris Barton and Ronnie Lott. It was previously called Champion Ventures, and invested professional athletes’ money in venture funds such as Accel Partners, Benchmark Capital, Kleiner Perkins Caufield & Byers, Mayfield Fund, Sequoia Capital, Redpoint Ventures and Technology Crossover Ventures, among others. Buyout funds in HRJ’s portfolio include Apollo Management, Bain Capital, Blackstone Group, J.W. Childs Associates and TPG. —Erin Griffith
Buffalo roams into PE
The University at Buffalo Foundation expects to commit between $20 million and $30 million to private equity this year, according to Les Brun, chair of the limited partner’s private equity subcommittee.
The foundation invests in special situations, mezzanine and venture funds. As of June 2008, the foundation’s allocation to venture capital and private equity stood at $31 million. —Nancy Gordon
CalSTRS PE Chief retires
Réal Desrochers resigned earlier this year as director of alternative investments for the California State Teachers’ Retirement System.
Desrochers joined CalSTRS in 1998. He previously managed a global private equity portfolio for CDP Capital. In his nearly 11-year tenure with the state pension fund, Desrochers oversaw the PE program as it grew from $3 billion in assets in 1998 to more than $17 billion. He is also credited with increasing CalSTRS’ activity in new areas, such as co-investments and secondary deals, and for overseeing the portfolio’s geographic expansion in Europe and elsewhere.
The system’s $17.1 billion in private equity assets under management represents a 14.3% exposure (compared to a 9% target).
“Réal had been planning his departure for some time but he kept it close to his vest until very recently,” says a source familiar with the situation, who adds that Desrochers’ “contributions to the private equity program at CalSTRS have been immense.”
CalSTRS will run a formal search to find Desrochers’ successor. In the interim, Seth Hall and Margot Wirth have been named acting co-directors of private equity. Wirth joined CalSTRS in 2001, while Hall has been with the pension system since 1999. —Dan PrimackOhio BWC finalizes $400M secondary sale
The Ohio Bureau of Workers’ Compensation has sold off its private equity investment portfolio, according to minutes from its November 2008 board meeting. UBS Securities had conducted the secondary sale, which netted nearly $400 million for 67 funds.
UBS had pitched the fund’s net asset value at $685 million, including about $271 million in unfunded commitments, according to private equity news site peHUB, which is affiliated with VCJ.
Among its investments, Ohio BWC has put money in funds managed by The Carlyle Group, Castle Harlan, HarbourVest Partners, Lexington Partners, Invesco Private Capital and Wind Point Partners.
More than three years ago, Ohio BWC ran afoul of many general partners when it threatened to release investment data, such as portfolio company valuations and methodology notes, for all of its private equity funds. While Ohio BWC ultimately decided to not release the contested underlying portfolio company information, it did reveal performance data for the funds in which it invested.
The disclosure report was prompted by an ongoing Ohio political scandal known as “Coingate,” in which Ohio BWC monies were invested, and lost, in a rare coins scheme. One result of Coingate was that Ohio BWC retained Chicago advisory firm Ennis Knupp & Associates to formally review the valuations of all its private equity fund investments. —Dan Primack
Caisse loses nearly $32B
Canadian pension fund Caisse de dépôt et placement du Quebec said that it lost $31.6 billion in 2008, as it was hit by tumbling stock prices and a depreciating Canadian dollar.
Caisse, one of the country’s largest pension funds, said that the loss canceled out a portion of the $63.2 billion that it earned in the preceding five years.
From Jan. 1 to Dec. 31, net assets declined to $95.6 billion from $124 billion.
Caisse said it changed its asset allocation last October in response to the global financial crisis. It said it increased its liquid assets and reduced its stock market exposure, including selling equities, closing out futures contracts and reducing its foreign exchange hedging. —Jennifer Kwan, Reuters
Montana lifts target PE allocation
The Montana Board of Investments has expanded its private equity target allocation to a range of between 9% and 15%, while continuing to commit to secondary funds.
The limited partner has yet to sign off on any new private equity pledges in 2009, although it has made a follow-on commitment of $10 million to secondary vehicle Lexington Capital Partners Fund VII LP, adding to a late 2008 pledge of $20 million, for a total commitment of $30 million. Lexington Partners intends to use this vehicle to invest in established global buyout, mezzanine and venture capital funds through secondary transactions.
In 2008, Montana committed at least $195 million to private equity. When asked how much the state might commit this year, CIO Cliff Sheets said that there is no targeted dollar amount. The LP currently has about $100 million left to commit before hitting 15%, the top of the new range.
Montana backs buyout, venture capital, distressed, mezzanine and special situations funds, and is a big supporter of funds of funds and secondary vehicles. More than one-quarter of the LP’s private equity portfolio is invested with Adams Street Partners, a Chicago-based funds of funds manager and investment advisor. —Nancy Gordon
Tacoma launches PE program
The $800 million Tacoma Employees’ Retirement System recently made its first pledges to private equity, edging its way into the asset class by committing $40 million to secondary vehicles being raised by funds of funds managers.
The limited partner pledged to HarbourVest Partners’ Dover Street VII and Pantheon Ventures’ Pantheon Global Secondary Fund IV, allocating $20 million to each.
Andrew Junkin, managing director of Tacoma’s consultant, Wilshire Associates, says that the LP probably will not invest again until later in the year. Junkin expects that Tacoma will likely look for primary fund exposure through a fund of funds at that time. —Nancy Gordon
Ohio Police makes FoF pledges
The Ohio Police & Fire Pension Fund, which plans to commit $300 million to the private equity asset class in 2009, has pledged to two funds of funds with international strategies.
The limited partner committed $35 million to the Adams Street Partners’ Adams Street Partnership 2009 Global Offerings Fund and $55 million to HarbourVest Partners’ HarbourVest International Private Equity Partners VI.
The state pension fund, which has $9 billion in assets under management, raised its target allocation from 3% to 7% in 2008. In September, Ohio Police said that its investment staff would likely suggest placing more capital directly into U.S. buyout funds and cutting back on exposure to domestic funds of funds and Ohio-based GPs.
Ohio seeks to have from 30% to 50% of its private equity portfolio in venture capital, 45% to 70% in buyouts, and up to 10% in distressed debt and other strategies, according to its 2007 annual report. —Nancy GordonArizona likes secondaries
The Arizona Public Safety Personnel Retirement System has approved plans to invest up to $7.5 million in secondary private equity funds. The amount has yet to be committed, but the limited partner is currently in confidential discussions regarding it.
Late last year, the state pension fund committed up to $40 million to CVC Capital Partners for CVC European Equity Partners V, a $14 billion European buyout fund. CVC Capital invests in services, construction products, chemicals, leisure and consumer products.
The state pension fund previously backed Apollo Group, Blackstone Group, Duff Ackerman & Goodrich, Macquarie, Mesirow Financial, MidOcean Partners and Towerbrook Investors. —Nancy GordonPrice leaves Connecticut
Jason Price has resigned as principal investment officer of private equity for the Connecticut Retirement Plans and Trust Funds.
In an email, Price said that he will leave his position at the state pension fund to join CIGNA Corp., an employee benefits company.
Price wrote, “The past three years working at the state has been an incredible period of personal and professional growth, and I thank you for helping to make it such a meaningful experience.”
The $22 billion Connecticut Retirement Plans and Trust Funds has had a bit of a revolving door for the last several years in the wake of State Treasurer Paul Silvester’s conviction of racketeering and bribery. Silvester’s successor, Denise Nappier, has served as state treasurer since then, but the state pension fund has seen a number of investment officers depart, including Gregory Franklin, Gary Cartner, Thomas Flanigan and Susan Sweeney. —Erin Griffith