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Three US pensions approve nearly $2bn in commitments

Despite the slowed LBO market, US pension funds’ private equity appetites are as voracious as ever. Megafunds, mid-market specialists, distressed vehicles, and European and Asia-focussed funds are among the latest recipients of fund commitments.

Fund commitments announced thus far this year indicate that US pensions have no plans to abandon their passion for the private equity asset class, despite hiccups in the large, leveraged buyout financing and refinancing markets.

Nearly $2 billion (€1.4 billion) in fresh commitments to varying fund types were recently announced by three US public pensions: the $52 billion Washington State Investment Board, the $35 billion Pennsylvania State Employees’ Retirement System and the $64 billion Pennsylvania Public School Employees' Retirement System.

The WSIB approved up to €150 million for Bridgepoint Capital IV, which is targeting €4 billion, and up to $150 million to Madison Dearborn Capital Partners’ sixth buyout fund, which is targeting $10 billion.

In November the pension, which is the ninth largest in the US, increased its private equity allocation to 25 percent from 17 percent both because of its relationships with top quartile fund managers and because of the asset class’ projected performance.

We expect private equity to earn 400 basis points over the return earned by public equity…

Washington State Investment Board

“We expect private equity to earn 400 basis points (4 percent) over the return earned by public equity over the long term, which is a conservative assumption based on historical spreads on our returns over the past one, three, five and 10 years,” the pension said at the time.

Meanwhile, two Pennsylvania pension funds have recently approved a slew of commitments.

The state’s public school system pension, PSERS, will commit up to €300 million for CVC European Equity Partners V, which is targeting €10 billion; up to $200 million for HSBC’s sixth Asian fund, targeting $1.25 billion; and up to $75 million to Catteron Partners’ seventh consumer-focussed fund, which is targeting $300 million.

It also committed up to $150 million for distressed-focussed Versa Capital Fund II, and up to $400 million for TPG’s sixth buyout fund, said to be targeting approximately $18 billion.

Pennsylvania’s State Employees’ Retirement System, or PA SERS, made four follow-on investments to private equity funds. It committed up to $50 million to ABRY Partners VI, a US media-focussed fund; up to $50 million to Asia Alternative’s second fund, $20 million of which is allocated to co-investments; up to €50 million in Bain Capital’s third European fund; and up to $10 million for CVI Global Value Fund, CarVal Investors’ $6 billion fund targeting loan portfolios, real estate, corporate securities and special situations.

PA SERS also approved commitments of up to $50 million for Advent International’s sixth North American and European buyout fund, targeting €5 billion, and up to $25 million to Patriot Capital Partners, which provides debt and growth equity to small, middle-market companies.