Oregon to hike PE target in school fund to boost performance

The $2.1bn Oregon Common School Fund will now target a 15% allocation to private equity.

Oregon Investment Council will increase the private equity allocation in its fund dedicated to making distributions to local school districts.

The $2.1 billion Common School Fund will now target a 15 percent allocation to private equity after a decision by the OIC board at its meeting held on July 20.

According to Raneen Jalajel, an associate partner at consultant Aon who made a presentation to the board, the school fund has an expected return of 6.6 percent, below the 7.1 percent it needs to meet its obligations.

“We have to broaden opportunities by expanding private assets for both a return profile and diversification,” Jalajel said at the investment council meeting July 20.

Jalajel and John Hershey, a director of investments at Oregon Investment Council, presented four potential new asset allocation mixes to its board, all recommending a 15 percent private equity target.

According to Hershey, private equity returned 37.8 percent for the school fund over the past year, buoyed by exposure to venture capital.

He noted that the school fund has three new commitments in its pipeline.

Hershey did not elaborate on the commitments or interest in venture capital. According to data from PitchBook, Oregon Investment Council’s VC fund investments in the past couple of years include:

  • a $100 million commitment to Sherpa Healthcare USD Fund, which is managed by China’s Sherpa Healthcare Partners;
  • an undisclosed commitment to GGV Discovery Fund III, a $610 million fund managed by GGV Capital of Menlo Park, Calif.;
  • an undisclosed commitment to Sherpa Healthcare USD Fund, a $200 million fund;
  • a $30 million commitment to Mayfield XVI, a $475 million fund managed by Mayfield of Menlo Park;
  • and a $60 million commitment to Mayfield Select II, a $275 million Mayfield fund.

The school fund makes distributions twice a year to state school districts, according to the state website.

The $95.6 billion Oregon Public Employees Retirement Fund, also managed by the Oregon Investment Council, targets 20 percent to private equity, OIC Chief Investment Officer Rex King said at the meeting.

The impacts of the denominator effect have boosted the fund’s allocation of private equity to 27.8 percent, which makes it the fund’s biggest asset class.

Additional reporting by Lawrence Aragon

This story first appeared in affiliate title Buyouts