Delaware Backs Centerbridge, Sells Equities To Meet Capital Calls

The Delaware Public Employees’ Retirement System recently disclosed two additional commitments to private equity as the pension fund continued efforts to sell public equities to have cash on hand to meet capital calls.

At a board meeting in late September, the $7.4 billion limited partner committed $10 million to Centerbridge Partners’s Centerbridge Credit Partners, which was established in August 2007 to invest in special situations, especially non-control distressed securities and undervalued credit investments. Centerbridge Partners has a $5 billion target for the fund, according to a regulatory filing.

Delaware also re-upped with venture shop Accel Partners with a pledge of $10 million to its new India-focused fund. The Accel India Venture Fund II, which closed with $60 million in November, makes seed-stage investments, as well as later-stage investments in growing companies in technology, technology-enabled services, Internet, mobile, media, life sciences, consumer products and services, and other high-growth sectors in India.

These pledges follow news that Delaware’s exposure to alternative investments surged in its past fiscal year, which ended June 30. The LP released its annual report on Oct. 29, disclosing that its allocation to the asset class had nearly doubled, to 18.1 percent in 2008 from 12.4 percent in 2007.

“During this volatile year the Board proactively reallocated the portfolio from fixed income and bonds to cash and alternative investments,” the annual report states. “The System continues to manage its investments by focusing on risk control and diversification into non-traditional asset classes.”

In the minutes from the September board meeting, Delaware was explicit about its need to liquidate equities for cash. Its board at that time approved a motion to sell an additional $250 million from its equities holdings, a move that it believed would provide an adequate position to fund all of its cash needs through 2011 as well as lower its exposure to equities, given market conditions.

The pension fund had identified the need to improve its cash position at a board meeting in late July. Back then the board estimated it would have capital calls of up to $300 million to various private equity and hedge funds in the next 12 months, and it adopted plans to liquidate a number of investments in order to make sure it would be able to meet those calls as well as make benefit payments of $170 million.