LP: The benefits of crowded fundraising

The Teachers’ Retirement System of Louisiana has seen a lot of managers over the past few months and has been able to pick and choose its favorite funds, a luxury limited partners enjoy in the crowded fundraising environment.

The Teachers’ Retirement System of Louisiana, like many limited partners in the market, has had the luxury of being highly selective over the past six months as it has worked to commit about $375 million to private equity funds.

The pension system, which has a 12 percent target to the asset class, has committed to some big name funds in the market, including Platinum Equity, Leonard Green & Partners, Apollo Global Management and Energy Capital Partners.

This week, the system pledged up to $50 million to Walton Street Real Estate Fund VII, which is targeting $2 billion for value-added and distressed properties in the US. The system has a 7 percent target to real estate, with 4 percent focused on core and 3 percent to opportunistic real estate.

The system also made its first infrastructure commitment in recent months, pledging $75 million to The Blackstone Group’s debut energy fund, which includes infrastructure as part of its investment focus. “We like the inflation hedge and the general diversification we get [in infrastructure] versus other asset classes,” Philip Griffith, the pension system’s chief investment officer, told Private Equity International.

“With so many products out there, with so many choices, we can be more selective,” Griffith said. “We have lots of managers and products coming through.”

With so many products out there, with so many choices, we can be more selective.

Philip Griffith

LPs are benefitting from the crowded fundraising environment, in which an estimated 1,800 funds have come or will be coming to the market this year. With so many managers seeking capital, LPs continue to have the kind of leverage that allows them to dictate better terms, and also get access to top quality funds that may have once been impossible to get into.

This is especially true on the venture capital side, in which the best funds have traditionally been sealed up tight to new investors. Because of a paucity of capital in the market, some managers have reached out to new investors, including public institutions that venture firms once shunned because of transparency requirements.

Louisiana still has some capital left to commit so it can reach its target by the end of the fiscal year in June. The system has committed to TPG Growth II, targeting $2 billion; Kohlberg & Company’s seventh fund, targeting $1.5 billion; Green Equity VI, targeting $5 billion and Platinum Equity III, targeting $3.75 billion.

Because Louisiana Teachers’ actual allocations to the asset classes are close to its targets, the system will cut the size of future commitments it makes, according to Griffith. Louisiana Teachers’ does not want to sell fund interests on the secondary market, he said.