Pension: California State Teachers’ Retirement System
Assets Managed: $152 Billion (July 31, 2012)
Private Equity Assets: $22.4 Billion (July 31, 2012
PE Allocation (PE Target Allocation): 14.7% (12%) (July 31, 2012)
Chief Investment Officer: Chris Ailman
America’s second-largest public pension, the $152 billion California State Teachers’ Retirement System, committed more than $1 billion to a bevy of private equity and debt-related funds in the second and third quarters, according to the pension’s semi-annual private equity report, which was presented to the pension’s board in early September.
Three commitments each topped $200 million, including a $250 million pledge to Centerbridge Partners’ Centerbridge Special Credit Partners II LP, a fund that has a $3.75 billion target. This is CalSTRS’s second commitment to Centerbridge. In 2009, the pension committed $250 million to the debut fund in the series, the Centerbridge Special Credit Partners LP. That fund has so far generated a 15 percent IRR as of September 2011, according to CalSTRS data.
Also receiving a $250 million pledge was the CalSTRS New & Next Generation Manager Fund II LP, a fund of funds for emerging managers that is overseen by INVESCO. CalSTRS pledged $217 million to the same fund in 2008.
Another large $200 million commitment was for Fortress Investment Group’s Fortress Credit Opportunities MA III LP, an opportunistic credit fund with a $420 million target. CalSTRS pledged a tiny $5 million to the predecessor fund, Fortress Credit Opportunities Fund II LP in 2010. That fund has so far been garnering a 17 percent return, according to CalSTRS data.
Thoma Bravo’s Thoma Bravo X LP and Coller Capital’s Coller International Partners VI LP each nabbed $100 million commitments. Thoma Bravo’s Fund X, a mid-market buyout fund, recently closed having raised $1.25 billion. CalSTRS’s new commitment comes after an 11 year absence in new commitments to the firm. The last fund was the 2001 vintage Thoma Cressey Fund VII LP, which returned an impressive 24 percent IRR as of September 2011.
Coller’s fund, which focuses on the global secondary market, recently closed having raised $5.5 billion. This is CalSTRS’s first commitment to a Coller fund.
Meanwhile, CalSTRS pledged $55 million to CHK Mid-Con Co-Invest LP. That co-investment fund, which is run by The Blackstone Group, had raised $661 million as of June 2012 according to a Securities and Exchange Commission filing.
Pacific Coast Capital Partners’ PCCP Equity VI LP won a $50 million pledge. That fund, a distressed real estate debt fund, is seeking to raise $500 million overall.
Finally, the Gores Group’s Gores Small Capitalization Partners LP received a commitment of $30 million. The fund, a small-cap fund that focuses on distressed and special situations, was aiming to raise $300 million. While the fund is the debut small capitalization vehicle from Gores Group, CalSTRS pledged to the 2007 vintage Gores Capital Partners II LP, which was generating a 13 percent return, according to the CalSTRS data.
Overall, CalSTRS has one of the largest private equity programs in the country. As of July 31, 2012, CalSTRS private equity portfolio had $22.4 billion in private equity capital, for an allocation of 14.7 percent. The pension is over its target allocation of 12 percent. Overall, CalSTRS’s private equity portfolio comprises 309 investments from 117 firms. More than 71 percent of the portfolio is made of buyout funds, while the other 29 percent is spread among venture capital, expansion capital, distressed debt and mezzanine debt.