Louisiana Teachers bets $150 mln on Lone Star, Roark

  • Roark, Lone Star receive $75 mln each
  • Lone Star targeting $7 bln for Fund IX
  • Half of Roark IV for franchising sector

The $16.7 billion retirement system committed $75 million each to Lone Star Fund IX and Roark Capital Partners IV at its board of trustees meeting in mid July, Maurice Coleman, its director of private markets, told Buyouts.

Lone Star Funds, which closed Fund VIII on $5.1 billion in May 2013, is targeting $7 billion in outside commitments for its latest distressed fund, which will invest in corporate and residential investments. The firm and its founder, John Grayken, will commit an additional $400 million to the vehicle.

Lone Star expects to use approximately 50 percent of Fund IX’s investment capital to acquire non-performing loans, distressed corporate debt and debt servicing platforms in Europe, according to a report compiled by Louisiana Teachers’ adviser Hamilton Lane. Another 40 percent of the fund is to be dedicated to distressed whole loans, structured products and corporate opportunities in the United States. The balance is dedicated to investments in Japan’s loan and corporate debt market.

Lone Star had raised $5.3 billion for Fund IX as of April 11, according to a Securities and Exchange Commission Form D filing. Fund VII, which closed on $4.6 billion in 2011, had netted a 60.8 percent internal rate of return through Dec. 31, 2013, according to Hamilton Lane’s report.

Roark Capital Group closed its previous fund on $1.5 billion in October 2012. The firm is seeking up to $2 billion for its latest flagship vehicle, according to a report by Hamilton Lane.

Previous reports indicated that Roark was targeting $1.5 billion for Fund IV. The firm did not respond to Buyouts’ requests for comment.

Roark specializes in acquiring high cash-flow businesses in the middle market, with a focus on companies active in the franchising sector. The firm expects investments in franchise companies to make up 40 percent to 60 percent of its latest fund.

Fund II, a $1 billion 2008 vintage pool, had netted a 25.6 percent IRR as of December 31, according to Hamilton Lane’s report.

Louisiana Teachers’ had an 11 percent allocation to private equity as of May 31, according to an investment report, two percentage points short of its 13 percent target. The $1.7 billion portfolio had generated a 13.78 percent 10-year return as of April 30.