Louisiana Teachers’ to slow commitment pace for PE, VC

  • Private-market pace capped at around $1 bln
  • $16.6 bln pension backs Kohlberg, Bridgepoint funds
  • PE portfolio valued at $1.8 bln

Teachers’ Retirement System of Louisianawill likely commit $300 million to $500 million to private equity and venture capital in fiscal 2017, at least 30 percent less than what it allocated to those strategies in the previous year, documents obtained through a records request show.

The $16.6 billion retirement system will likely build its exposure to PE and VC through re-ups with current general partners, a report from consultant Hamilton Lane says.

Louisiana Teachers’ committed $714 million across nine PE and VC funds in the year ended June 30, the report says. The system allocated another $614 million across other private-market strategies, including real estate, private-market debt, commodities and infrastructure funds.

The system is likely to cap its allocation to private-market strategies, including PE and VC, at around $1 billion in the current fiscal year. Its pacing could change depending on market conditions, Hamilton Lane wrote.

Hamilton Lane Managing Director Paul Yett indicated he’s been advising clients to keep their commitment pacing steady in the current climate. The advice is particularly timely in the context of declining distributions. In June, Louisiana Teachers’ indicated that capital calls would likely outpace distributions for the first time in several years, Buyouts reported.

“There’s a temptation to really accelerate because you have to hit your target allocation in the asset class. That’s something you have to be cautious of,” he said on a panel at the late-July Pension Bridge conference in Chicago. “I think it’s better to under-allocate than to really hit the gas pedal in this market.”

Louisiana Teachers’ still remains an active LP. In August, the system committed as much as $164 million across three private-market funds. All three commitments are subject to final negotiations.

The largest commitment, as much as $75 million, went to a re-up with Kohlberg & Co’s new middle-market buyout fund. Kohlberg Investors VIII is targeting $2 billion.

Louisiana Teachers’ also committed up to $50 million to Oaktree Capital Management’s eighth real estate opportunities fund, targeting $3.5 billion, and 30 million pounds ($39 million) to Bridgepoint Development Capital’s third small-market fund for Western European buyouts. Bridgepoint set a 600 million pound target.

Slightly more than a quarter of Louisiana Teachers’ assets were invested in private-market assets as of April 30. The PE portfolio, valued at $1.8 billion, netted a 7.97 internal rate of return since inception.

Action Item: Louisiana Teachers’: www.trsl.org