Washington, D.C.-based PCG International has closed its first-ever investment vehicle: a $400 million (€296 million) fund of funds, backed solely by the largest pension in the US, the California Public Employees’ Retirement System.
The PCG International Emerging Markets Fund will invest in private equity funds in international markets including Latin America, Africa, India, China, Central Europe and Japan.
Though Japan typically isn’t characterised as an emerging market, “we think of Japan as an emerging private equity market”, said Steve Cowan, a PCG International managing director. “It’s obviously a very mature economy”, but prior to 1998 or 1999, there wasn’t much buyout activity there, he said. “It’s really a very recent evolution.”
With CalPERS as the only investor in the vehicle, Cowan said “the economics are clearly tailored to the opportunity with CalPERS, but the structure is very similar to a typical fund of funds”. Specific financial details were not disclosed.
The vehicle’s investments will not be industry-specific, Cowan said.
“We’re really focused primarily on identifying the best general partners in the world without a particular focus on the underlying strategies or sectors that they [specialise in],” he said, noting that investment strategy and sector focus tend to vary from region to region.
Cowan also confirmed that PCG International is mulling the creation of one or more parallel funds that would be open to other investors.
Affiliated with La Jolla, California-based gatekeeper Pacific Corporate Group, PCG International was formed in 2005 to invest in emerging markets and is led by Cowan, Gene Pohren, and Stephen O’Neill. Cowan and Pohren previously worked for quasi-government development organisation Overseas Private Investment Corporation, while O’Neill ran investment and advisory firm Battery Kemble.
CalPERS has consistently backed PCG and its subsidiaries, despite internal turmoil and turnover that has prompted other clients to drop the advisory firm.
CalPERS, a heavyweight limited partner that invests with numerous firms, has more than $33.4 billion in active commitments via its alternative investment programme.