Chicago Teachers’ pension adds two African PE strategies

Chicago Teachers’ Pension Fund allocated $20 million to two GPs with Africa-focused private equity strategies, concluding a search that began in July 2018.

The $10.8 billion fund committed $10 million each to Advanced Finance and Investment Group and Development Partners International.

For Development Partners International, Chicago Teachers’ allocated to a commingled fund, ADP Fund III. For Advanced Finance and Investment, the pension committed to a co-investment vehicle in which it is the sole limited partner.

Both GPs will pursue buyout strategies, with Advanced Finance and Investment focusing on the lower-middle market and Development Partners focusing on larger buyouts across several sectors, including industrials and logistics, consumer and retail, financial services, healthcare, natural resources and telecommunications.

Between the two, Chicago Teachers’ will have access to a broad range of African private market opportunities, CIO Angela Miller-May said. Development Partners and Advanced Finance and Investment both have principals with long track records investing through market cycles in Africa. Their teams impressed Chicago Teachers’, which reviewed 22 strategies offered by 20 different firms.

“In all of our private equity investments, we underwrite teams of people,” Miller-May told Buyouts. “We look for high character, ‘safe pair of hands’, cultural alignment in doing the right thing, and a proven ability to outperform public markets.”

The AFIG Fund II co-investment vehicle also offers “a greatly reduced fee and visibility into existing investments,” with exposure to financial services, consumer goods, agribusiness, light industrial and manufacturing, Miller-May said. These are all sectors that will capitalize on Africa’s growth story.

When it began the search, Chicago Teachers’ said it was open to buyouts, growth equity or special situations, and it was interested in either pan-African or country-specific investment strategies. The retirement plan had invited four finalists to its November meeting but deferred a decision in light of recent board elections, Miller-May said. Chicago Teachers’ installed five new trustees on its board after elections in November.

The other finalists under consideration were Pantheon Ventures and Sango Capital Management. Chicago Teachers’ already invests with Pantheon through a separate mandate.

The retirement fund has been invested in Africa through fund-of-funds managers for more than 20 years. The new commitments mark Chicago Teachers’ first direct primary allocation, Miller-May said. Pursuing African PE is part of the pension funds’ desire to think globally in its long-term investment decisions, she said.

Development Partners International, which manages $1.1 billion in assets across two private equity  funds, has a pan-African focus, with 19 portfolio companies operating in 27 countries. Advanced Finance and Investment, based in Mauritius, has two funds that focus on west and central African companies in the industrial, financial and infrastructure sectors.

Chicago Teachers’ has a 5 percent allocation target to private equity, with an actual allocation of approximately 3 percent.

The pension fund still has an open RFP for private equity firms owned by women, minorities or people with disabilities. Chicago issued two RFPs in January and wants to allocate $40 million to private equity managers and $25 million to infrastructure.

Update: This story was updated to include more detail about the strategies chosen by Chicago Teachers’ Pension Fund.