The Iowa Public Employees’ Retirement System, which recently committed $180 million to a pan-European buyout fund, two North American buyout vehicles and a distressed debt fund, has upwards of $500 million left to commit to funds this year.
“The maximum amount that can be committed in 2008 is $800 million,” Karl Koch, CIO, told Buyouts Magazine. “I estimate about $300 million has been committed so far.”
Unlike many other pension funds, Iowa’s board does not approve individual commitment amounts. Instead, advisory firm Pathway Capital Management has full discretion to make commitments up to a maximum annual dollar amount approved each year by the board. Koch stressed that Pathway is not required to commit $800 million in 2008. How much actually gets committed will depend on the quality of deals and Pathway’s discretion, he said. Here’s a rundown on Iowa PERS’s latest commitments:
* A €31.75 million ($49 million) slug will go to CVC European Equity Partners V, a pan-European buyout fund that initially targeted €11 billion but because of high investor appetite is now targeting €12 billion. Besides European investors who have committed to CVC previously, the firm is trying to expand its U.S. investor base. In January, the Pennsylvania Public School Employees’ Retirement System made a €300 million ($438 million) commitment to the fund.
* It pledged $45 million to Madison Dearborn Capital Partners VI, a North American buyout shop that specializes in communications, consumer goods, financial services and health care. In April, the $10 billion-target fund held a first close on $3 billion. The firm will probably hold the fund open until the end of the third quarter in order to give some re-upping LPs that need to wait before they can commit to the new vehicle the chance to do so, as previously reported in Buyouts.
* It committed $45 million to Onex Partners III, which, as of July, had garnered over $3.3 billion from 50 backers toward its $4.5 billion target. Onex Corp.’s strategy is to buy good companies with problematic balance sheets. The firm specializes in carving out parts of U.S. multinational corporations and transforming them into stand-alone companies. Although Onex is a Canadian firm, almost all of the companies it buys are in the United States.
* It committed $41 million to H.I.G. Bayside Debt & LBO Fund II, which was established in March of this year and has a minimum investment of $10 million. Bayside Capital, an affiliate of HIG Capital, invests in distressed debt obligations and other securities of distressed mid-market companies. The firm closed on about $3 billion for the vehicle, according to LBO Wire, published by Dow Jones & Co., having targeted $2 billion. The fund is a lower to mid-market distressed buyout pool that mainly focuses on the United State but it may also do some investing in Europe.
In related news, Iowa PERS this June issued an RFP for a new general consultant. Its contract with Wilshire Associates expires in September. Among other duties, the general consultant will advise the LP on private equity capital market assumptions and allocations, and on private equity investment policies, strategies and the choosing of managers. The deadline for responses was June 25. It’s expected that a contract will be signed by September 26. The contract will have a six-year term, starting October 1.
Iowa PERS has a 10 percent allocation to private equity. It earned a time-weighted return (net of fees) of 5.86 percent from its private equity allocation, outshining its other asset classes, in the quarter ending March 31, 2008.