Exclusive: Oregon commits $400m to Stonepeak Fund II

The US pension's investment is expected to bring the vehicle to a $3.5bn first and final close by year end.

Acting on behalf of the Oregon Public Employees Retirement Fund (OPERF), the Oregon Investment Council (OIC) has approved a $400 million commitment to Stonepeak Infrastructure Fund II, Infrastructure Investor has learnt.

Sources with knowledge of the fundraising process say the commitment should allow the vehicle to close on its $3.5 billion hard cap by year end. 

OIC Investment staff describe the investment as a “re-up” to an existing relationship that dates back to 2012, when OIC invested $100 million in Stonepeak Infrastructure Partners ' debut fund. The vehicle closed in October 2013 on $1.65 billion.

The second fund has a target of $2.5 billion, with a first close expected on or around October 30, according to material from an OIC's board meeting. Earlier this month , Infrastructure Investor reported that Stonepeak is expected to hold a first and final close before the end of the year, according to sources.

Stonepeak declined to comment.

OIC's investment staff made the recommendation, which its pension consultant TorreyCove Capital Partners seconded, citing Stonepeak's experienced team, the substantial gap between capital demand and supply in the North American infrastructure sector, and the fund's middle-market focus.

Stonepeak Infrastructure Fund II, like its predecessor, will target majority and/or control positions in the middle market with individual equity investments in greenfield and brownfield assets ranging from $75 million to $300 million. The focus will be on power, water, energy, communications, renewables and transportation.

The fund will have a five-year investment period and a 12-year duration with three possible one-year extensions.

Oregon's $400 million pledge is in line with OPERF's previously-stated objective of committing between $1.5 billion and $2 billion to alternatives – which in addition to infrastructure includes energy, mining and timber – in 2015.

As for infrastructure specifically, the target allocation is 20 to 30 percent of the alternatives portfolio or approximately $1.75 billion to $2.6 billion at current OPERF net asset value, which as of September 30, 2015 totalled $67.5 billion. “To date, OIC has approved $1.15 billion in aggregate commitments to the sector, and staff considers Stonepeak II an anchor commitment within the OPERF infrastructure portfolio,” the investment staff stated in the meeting document.

In addition to OPERF, other institutional investors that have made commitments to Stonepeak II include the New Mexico Educational Retirement Board ($50 million) and the Maine Public Employees Retirement System ($150 million), according to Infrastructure Investor Research & Analytics.

OPERF is part of the Oregon Public Employees Retirement System (OPERS), the vehicle through which public employers provide retirement benefits to Oregon's public employees. With more than 900 public employers participating, OPERS covers 95 percent of all state and local government employees in the state.

OPERS is directed by its own independent board and administered by its own agency based in Tigard, Oregon. Its contributions go into the Oregon Public Employees Retirement Fund, which pays OPERS members their benefits.

OPERF in turn is managed by the Oregon State Treasury under the direction of the Oregon Investment Council, which invests all State of Oregon funds, including OPERF and the State Accident Insurance Fund.