LA Fire & Police Commits To Candover Despite Liquidity Worries

The Los Angeles Fire & Police Pension System, although concerned about its commitment pace and having adequate liquidity to make further pledges due to the volatility in the financial markets, has re-upped to Candover Investments by pledging to its tenth European buyout fund.

The pension fund committed €20 million ($26 million) to the Candover 2008 Fund, earmarked for acquisitions of mid-sized companies in Western Europe. Previously the investor backed the Candover 1997 Fund. Benedetto, Gartland & Co. is the placement agent.

London-based Candover Investments seeks €5 billion for its Candover 2008 Fund, which held its first close in August with commitments of €2.8 billion, including €1 billion of the firm’s own capital. The firm closed the 2005 Fund with €3.5 billion, surpassing its target of €3 billion. The firm recently used the 2008 fund to invest in Expro International, a U.K. oilfield technology and services provider.

According to a Los Angeles Fire & Police Pension System document dated November 20, the six previous funds of Candover Investments have generated an aggregate gross IRR of 20.6 percent and an investment multiple of 1.6x. The management fees for the 2008 fund are 1.5 percent of commitments in the investment period; 1 percent of the acquisition costs after that; 20 percent carried interest; 8 percent preferred return; and a 100 percent transaction fee offset.

The pension fund went ahead with the commitment despite growing trepidation about capital calls. According to a board document, “The effects of the recent market turmoil have raised questions about the program’s commitment pace and the ability of the pension fund to generate liquidity needed to fund additional commitments.” The staff and various consultants are looking into these issues.

The limited partner, which has about $11.1 billion in assets under management, has a target allocation to private equity of 10 percent. To attain that goal, the board has already committed $1.74 billion to the asset class, but it believes it still needs to pledge $335 million more to reach the target.