CalSTRS pledges $785 mln in second quarter

  • $275 mln committed to buyouts
  • $158 mln goes to co-investments
  • $112 mln goes to venture capital

The California State Teachers’ Retirement System committed roughly $785 million to co-investments and private equity funds, including $275 million to buyout funds, from April 1 to June 30, according to a semi-annual report released in advance of its scheduled Sept. 5 investment committee meeting.

Among buyout funds getting commitments from the $190 billion pension fund during the quarter were The Resolute Fund III LP, managed by The Jordan Company ($100 million commitment) and Thoma Bravo Fund XI LP, managed by Thoma Bravo ($75 million)—see accompanying chart for full list. Both firms are based in Chicago. Buyouts represented just over two-thirds (71 percent) of CalSTRS’s $22.6 billion private equity portfolio as of March 31, according to the report.

In July, CalSTRS Director of Private Equity Margot Wirth told Buyouts that the retirement system would be reducing the size of its commitments to large, mega-buyout funds moving forward. The CalSTRS private equity portfolio remains heavily invested in pre-crisis vintage funds. Approximately 50 percent of its total commitments were made from 2005 to 2008, according to the report.

“Those vintages are not going to end up terrible,” Wirth said at the time. “We just had a very high exposure to those types of funds.”

In addition to buyouts, CalSTRS has diversified its private equity portfolio across sub-allocations, including venture capital, expansion capital, distressed debt and mezzanine funds. As of March 31, CalSTRS investments were in line with the current sub-allocation ranges set by its investment committee, according to the report.

Also in the second quarter CalSTRS committed $165 million across a pair of growth equity funds (Spectrum Equity VII and EnCap Flatrock Midstream Fund III) and $75 million to a distressed debt vehicle SSG Capital Partners III. CalSTRS made four co-investments in the quarter totaling $158 million, according to the report.

Also during the quarter CalSTRS committed $112 million across four venture capital vehicles. CalSTRS had closed just one venture capital commitment in the six months leading up to the April-June quarter. The retirement system’s sub-allocation to venture capital within its private equity portfolio stood at 5.6 percent as of March 31, near the bottom of its long-term target range of 5 percent to 15 percent.

“Venture capital investment activity continued to increase in the first half of 2014,” according to the report, which also noted that exit activity for venture funds “continued to show strength.”

Compared with the second quarter CalSTRS committed a similar tally to private equity during the first, allocating $690 million across six private equity funds. The retirement system also made one $25 million co-investment during the first quarter.

The semi-annual report was prepared by CalSTRS adviser Pension Consulting Alliance.