Florida Lays Down $750M For LBOs, Mezz And Secondaries

Pension System: Florida State Board of Administration

Assets Managed Overall: $158 billion (April 30, 2012)

Assets Managed (Main Pension): $126 billion

Private Equity Allocation (Main Pension): $6 billion (4.8%)

Private Equity Target (Main Pension): 5%

Executive Director & Chief Investment Officer: Ash Williams

The Florida State Board of Administration, which manages $158 billion in pension and emergency funds, has committed $750 million to six private equity funds, three of them funds of funds and secondary funds. The series commitments are among the largest made by limited partners so far in 2012.

All six commitments were made by Florida’s main pension plan, the $126 billion Florida Retirement System, which has 4.8 percent of its assets, or $6 billion, invested in private equity capital. The pension’s private equity target is 5 percent. Earlier this year, the pension named Trent Webster as its new head of private equity, replacing Jim Treanor, who returned to the private sector.

The two biggest commitments were $200 million to the latest flagship private equity fund from Warburg Pincus, the Warburg Pincus Private Equity XI LP, and $200 million to distressed specialist Ares Private Equity’s Ares Corporate Opportunities IV LP.

Warburg’s Fund XI is among the largest private equity funds in the market with an overall target of $12 billion. Earlier this year, the fund held an interim close of $5 billion. Other investors in the fund include the New Jersey Division of Investment, which pledged $300 million to the fund, the Washington State Investment Board, which committed $750 million to the fund and the Ohio School Employees’ Retirement System, which pledged $50 million.

This is Florida’s third investment with Warburg Pincus. The fund pledged $75 million to Fund IX, a vintage 2006 fund that is returning an IRR of 8 percent, according to Dec. 2011 data from Florida SBA. It also invested $150 million in Warburg Fund X, a 2008-vintage fund that is so far returning an IRR of 0.1 percent according to the same December data.

The second big pledge was to Ares Corporate Opportunities IV LP, an opportunistic mid-market fund that has a target of $4 billion. Other investors in the fund include the New York State Teachers’ Retirement System, which committed $100 million, the Indiana Public Retirement System, which committed $75 million and the New Mexico Educational Retirement Board, which pledged $40 million.

Florida committed $100 million to the previous fund in the series, the 2009-vintage Fund III, which has had very strong returns. The fund was returning an IRR of 22.3 percent as of Dec. 2011, according to Florida SBA data.

The pension also made a big bet on mezzanine debt, pledging $150 million to the latest offering from Crescent Capital Partners, the Crescent Capital Partners Mezzanine Fund VI LP. It marks the pension’s first commitment to Crescent. No data on Crescent Capital’s previous mezzanine fund was available.

Secondary private equity investments also got the nod. Florida pledged $100 million to AXA Private Equity’s latest secondary offering, AXA Private Equity Secondary Fund V LP, which closed in June having raised $7.1 billion. The fund is the largest secondary fund ever raised, and is the first commitment by Florida to AXA Private Equity.

Two pledges of $50 million each were made to funds of funds. The first was to RCP Advisors’s latest fund, RCP Advisors VIII LP, a fund of funds that is targeting $250 million. This is the fifth investment that Florida has made to RCP funds of funds. Florida pledged $50 million each to RCP’s funds IV through VII. Funds IV (vintage 2007), V (2008) and VI (2009) were returning IRRs  of 5 percent, 3 percent and -6 percent, respectively.

A second $50 million fund of funds commitment was made to SVB Strategic Investors Fund V LP, operated by an affiliate of Silicon Valley Bank. This is the second commitment by Florida to the same fund. The first commitment to the fund, for $100 million, was made in late 2011. The fund is seeking to raise $250 million.