LA City Hops On H&F Bandwagon

The Los Angeles City Employees’ Retirement System recently pledged up to $20 million to one of the most popular buyout funds around: Hellman & Friedman Capital Partners VII LP.

The pool is San Francisco-based Hellman & Friedman LLC’s latest mega-fund effort, targeting $7 billion with a hard cap of $10 billion. The firm’s new war chest will be used to make equity-related investments of $300 million to $1.5 billion, mostly in the United States and Europe, though some checks may be written in Eastern Europe, Asia and Australia. Investment targets include strong business franchises with predictable revenue and earnings growth that generate high levels of free cash flow.

Fund VII has been a favorite among pension funds, having recently received a $15 million pledge from the San Diego County Employees Retirement Association along with other commitments from backers such as Florida State Board of Administration; Kansas Public Employees Retirement System; Los Angeles Fire and Police Pensions; Maine Public Employees Retirement System; Montana Board of Investments; Ohio Public Employees Retirement System; and State of Wisconsin Investment Board.

The Los Angeles city pension fund has supported Hellman & Friedman in the past with pledges of $11 million and $20 million to Funds V and VI, respectively. Fund V, according to performance data from CalPERS, had a net IRR of 30.4 percent as of Dec. 31, 2008.

As of April 2, the LP had an actual allocation to private equity of 10.4 percent, a target of 8 percent and a range of 3 percent to 12.5 percent.

The pension fund is currently conducting an asset allocation review that will determine how much more, if any amount at all, it will commit to private equity over the next one to three years.