LP Briefs, January 2009

SERS tables investing for now

The Pennsylvania State Employees’ Retirement System (SERS) passed on making any alternative asset investments during its December meeting, citing “the uncertain market environment.”

The state pension fund tabled consideration of proposed re-investments in four funds: Hellman & Friedman Capital Partners VII, TL Ventures VII, Lime Rock Resources II and Novitas Capital IV.

A SERS spokesperson said that the pension fund had not specified a time it would reconsider these investments or make any new investments. It has not pursued any sales of existing private equity positions on the secondary market. The board next meets on Jan. 28.

The pension fund reported that its venture portfolio—which consists of commitments to 116 funds—was worth $1.49 billion at the end of the first quarter of 2008. Its private equity portfolio, consisting of commitments to 207 funds, was worth $4.5 billion.

SERS is over-allocated to alternative assets. At the end of June, 17.8% of its total portfolio was allocated to venture capital and private equity. Its target is 14 percent. —Alexander Haislip

Maryland ups target

The Maryland State Retirement and Pension System recently tripled its target allocation to private equity and backed up that enthusiasm with three commitments totaling $235 million.

Maryland’s portfolio consists mostly of buyout and venture funds, but the LP also backs funds used for growth, distressed (control and non-control), mezzanine, secondary, and energy and natural resources investments.

Also, the state pension fund, which has roughly $33 billion in assets under management, raised its target allocation for private equity to 15% from 5 percent. The LP has not set a pace for reaching the target, although it will take a number of years to attain it, says Dean Kenderdine, executive director. As of Sept. 30, the actual private equity allocation stood at 2.1 percent.

Among its recent pledges, Maryland committed $35 million to Brazos Private Equity Partners’ Brazos Equity Fund III; $100 million to HarbourVest Partners’ Dover Street VII; and $100 million to TPG Capital’s TPG Partners VI. —Nancy Gordon

Michigan exceeds target

The University of Michigan is the latest institutional investor to bust through its target allocation to private equity.

The system’s November investment report shows 14.2% exposure to private equity, compared to a 12.5% target allocation. Venture capital is also past plan, at 6.9%, compared to a target of 6 percent. Part of this is the so-called denominator effect, whereby falling public equity prices have artificially boosted the portfolio weighting of illiquid assets like private equity.

But part of it also seems to be that the Michigan regents keep committing to new funds, whereas certain other institutional investors have pulled back. For example, the University of Michigan disclosed $69 million in new commitments to funds managed by Claremont Creek Ventures, Odyssey Investment Partners and Sequoia Capital (both Sequoia’s U.S. growth fund and India growth fund). It also made a July commitment to ATA Ventures, which is not reflected in the November investment report. —Dan Primack

CalPERS ups target

The California Public Employees’ Retirement System plans to boost its allocation target to alternative investments to 10 percent. The pension fund also announced additional pledges totaling nearly $800 million.

As of Oct. 31, CalPERS’ actual allocation to alternative investments stood at 13.7%, well above an interim target of 9.5% for the third quarter, according a recent asset allocation update.

CalPERS recently committed $500 million to The Blackstone Group’s Blackstone Capital Partners VI, $192 million to Candover Investments’ Candover 2008 and $100 million to Aisling Capital’s third life science venture capital fund. —Nancy Gordon

Fort Worth pledges $30M yearly to PE

The $1.6 billion Fort Worth Employees’ Retirement Fund plans to commit about $30 million a year to private equity funds, building on $64 million in commitments to date, says Ruth Ryerson, executive director and CIO.

The city currently has relationships with Aldus Equity, an advisor that manages $12 million for the limited partner; and Credit Suisse, which oversees $19 million. The LP has also made commitments to Montagu Newhall Associates, a venture capital fund of funds manager; and Ashmore Investment Management’s Global Special Situations Fund 3, which is concentrated on distressed emerging market companies in China, India, Russia and Brazil.

Fort Worth has an allocation range to private equity of 2% to 10.5 percent. The LP’s long-term target is 7.5%, but it has also set a 4% short-term target that it expects to achieve within the next year or two. As of Sept. 30, the investor had an actual private equity allocation of about 3 percent. —Nancy Gordon

S.C. commits $750M to Apollo

The South Carolina Retirement System Investment Commission recently committed $750 million to Apollo Management as part of its push to concentrate on debt investing.

The money is earmarked for “a variety of products within Apollo,” says Hilary Wiek, director of public and private equities. “We are trying to be opportunistic, so the exact allocation is not set up front, but there will be a lot of debt.”

South Carolina is a recent entrant to the asset class, having only received permission to commit to alternative investments in late 2006. The LP typically commits to funds that avoid the J-curve, such as mezzanine debt, secondary and distressed debt funds, rather than buyout and venture funds.

The state pension fund, which has an investment portfolio of $29 billion, recently committed to Welsh Carson Anderson & Stowe’s 11th fund with $50 million; and Sankaty Advisors’ Sankaty Credit Opportunities IV with a $200 million pledge. Sankaty Advisors is an affiliate of Bain Capital. —Nancy Gordon