CalSTRS commits $200 mln to CD&R Fund IX

  • Agency pledges $743 million to private equity in first quarter
  • Clayton, Dubilier & Rice Fund IX draws largest commitment
  • Pension system also invests in two European funds

The California State Teachers’ Retirement System committed $743 million to private equity investments during the first quarter, with a $200 million commitment to Clayton Dubiler & Rice Fund IX drawing the single largest pledge, according to an investment report published on the pension agency’s website.

CalSTRS renewed ties with existing manager Clayton Dubilier & Rice, as the buyout firm eyed a $5 billion target for its ninth flagship fund, aimed at control buyout investments in North America. That pool has since closed with $6.4 billion in committed capital, according to a spokesman.

The pension system also committed $100 million to M2 Private Equity Fund-of-Funds II LP, which has a $400 million target. That pool from Chicago-based Muller & Monroe plans to focus investments on emerging and niche private equity funds targeting the lower middle market.

CalSTRS also pledged $100 million to Castlelake III LP, which is targeting $1.4 billion to invest in mid-market distressed assets and corporate distressed securities. That fund is managed by Minneapolis-based Castlelake, which changed its name from TPG Credit Management last August.

TPG Capital’s TPG Opportunities Partners III LP, a distressed debt fund targeting $2.4 billion, drew a commitment of $125 million from CalSTRS.

On the European front, CalSTRS committed about $126 million to Permira V from Permira Advisers as an add-on investment. It also pledged about $67 million to Alchemy Special Opportunities Fund III, a distressed debt vehicle focused on special situations in mid-sized companies from Alchemy Partners.

Finally, CalSTRS committed $25 million to Spectrum ER Investors LLC, a co-investment with sponsor Spectrum Equity. In February, Spectrum announced that Extreme Reach, a provider of video advertising and talent technology for TV, web, mobile and other video media, purchased the TV business of Digital Generation Inc for $485 million in cash.

All told, the CalSTRS private equity holdings made up 11.9 percent of the asset allocations in the retirement system. That was below its 2013-2014 target and long-term target of 13 percent.

The market value of CalSTRS holdings stood at $183.4 billion as of March 31, up from $165.8 billion on June 30, 2013.

During the quarter, CalSTRS received $1.6 billion in distributions from its private equity investments. As of March 31, CalSTRS reported an investment multiple of 1.52x for its buyout portfolio for a net IRR of 12.06 percent over the life of its investment program for the asset class.

(This story has been updated to include the final closing figure for Clayton, Dubilier & Rice Fund IX.)