LP Briefs, Aug. 4, 2008

Connecticut seeks consultant

The Office of the Connecticut State Treasurer late last month issued an RFP for a private equity consultant to develop a co-investment program for the $26 billion Connecticut Retirement Plans and Trust Funds. The deadline for applications is Sept. 15.

A decision is expected in December, and the contract is expected to start no later than March.

Connecticut seeks one or more firms to provide investment consulting services for a five-year term. The consultant would work with the treasurer and chief investment officer of the funds to develop a co-investment program in venture capital, leveraged buyouts, special situations, mezzanine capital and international private equity. Much of the money would eventually wind up in the hands of Connecticut-based fund managers and Connecticut-based businesses.

The state pension funds have a target allocation of 11% for private equity, which includes corporate finance, venture capital, private debt vehicles and direct co-investments. The state steers about 60% to 90% of its private equity commitments to corporate finance and buyout funds, and the rest to venture capital funds. To gain exposure to certain markets, such as venture capital, small buyout and clean technology, the state invests through funds of funds.

The Connecticut Retirement Plans and Trust Funds was one of the first public plan sponsors to create a private equity allocation and, as of March 2008, had about $2.5 billion in capital committed to the asset class. Its goal is to commit $600 million to $700 million yearly to private equity, a pace intended to reach the 11% target allocation in a few years. The pension fund has made more than $1.2 billion in private equity commitments to women- and minority-owned firms.

The state continues to seek a chief investment officer to replace Susan Sweeney, who left in May 2007, according to spokesperson Christine Palm. In June of 2007, Lee Ann Palladino was appointed acting CIO.

Connecticut Retirement Plans and Trust Funds is made up of six state pension and eight state trust funds that cover 160,000 teachers, state employees and municipal workers as well as academic programs, grants and other state initiatives. —Nancy Gordon

Vermont may include PE in state program

The $3.3 billion Vermont Pension Investment Committee may make commitments to private equity funds as part of its Economically Targeted Investments Program, which seeks investment opportunities that will benefit Vermont’s economy.

The committee invests money on behalf of three state pension funds: the State Teachers’ Retirement System of Vermont, the Vermont State Employees’ Retirement System and the Vermont Municipal Employees’ Retirement System. Responses to the RFP were due June 25. Winners are expected to be chosen on August 20.

There are no stated limits to private equity investments in the ETI program, beyond the 2% to 3% allocation limit to alternative investments set for the participating retirement systems. The private equity allocation target is not fully funded for any of these systems. Allocations to recipients may rise and fall over time over time.

Vermont Pension Investment Committee expects to award commitments to buyout firms, venture capital firms, securities investment managers, financial institutions, insurance companies, real property investment managers, not-for-profit corporations and foundations. The goal of the program is to help finance small and medium-sized businesses in the state, and to provide housing for poor and middle-income people. The state seeks a market rate of return commensurate with the assumed risk. —Nancy GordonHawaii hot to double allocation

The $10.7 billion State of Hawaii Employees’ Retirement System intends to pick up the pace of its private equity investing this year and plans to double its target allocation to the asset class late this year or early next year. The private equity target allocation is 3.5%, or $375 million. The state remains about $100 million short of that goal.

The board has directed Hawaii’s discretionary adviser, Abbott Capital Management, to make larger commitments to help reach the target sooner, says Chief Investment Officer Rod June. “We want to commit no less than $115 million annually starting in 2008,” June says. “Ideally, we would like to see commitments of $120 million in 2009, $130 million in 2010 and $140 million each in 2011 and 2012.”

June hopes to double the pension fund’s exposure to private equity over the next five years to 7%, but the board has not yet approved such an increase. “We are considering it later this year or early next year,” June says. Such a move would likely mean ratcheting up the state’s exposure to non-U.S. private equity and real estate in 2009.

Funds backed by the State of Hawaii Employees’ Retirement System in 2007 include Battery Ventures VIII, Canaan VIII, Eos Capital Partners IV, Green Equity Investors V, JMI Equity Fund VI, Kelso Investment Associates VIII, KKR 2006 Fund, Oak Hill Capital Partners III, The Resolute Fund II, Thomas H. Lee Equity Fund VI, and Warburg Pincus Private Equity X.

June became the pension fund’s CIO in January. He previously served as a private equity investment officer for the Los Angeles City Employees’ Retirement System for nine years. —Nancy Gordon

U.S. LPs look to Italy

Two U.S. pension plans chose an Italy-specific fund to receive private equity investment slugs in July.

The $16 billion San Francisco Employees’ Retirement System and the $34 billion Pennsylvania State Employees’ Retirement System both committed €20 million ($31.7 million) each to Clessidra Capital Partners II, which has a target of $2.4 billion.

The commitments help illustrate growing limited-partner interest in country-specific buyout funds. “Over the last several years the SERS board has been moving across the entire fund to achieve greater global diversity and international exposure,” says Robert Gentzel, spokesperson for Pennsylvania SERS. “The Clessidra fund will focus on investments in the Italian market and thus will help broaden SERS’ international private equity exposure.”

Clessidra SGR S.p.A., the fund’s Milan, Italy-based management company, was established in February 2003 to invest in utilities and infrastructure. Earlier this year, Clessidra SGR acquired a 40% stake in Italy’s largest toy manufacturer, Giochi Preziosi.

Clessidra SGR raised $1.1 billion for its first buyout fund, which closed in 2005. At the time, it was Italy’s largest buyout fund. Clessidra Capital Partners II was established in January 2008, according to a regulatory filing, and has a minimum investment of $40,000.

The California Public Employees’ Retirement System committed about $60 million to Clessidra Capital Partners’s 2005 vehicle and reported a net IRR of 105.7% for the fund as of Dec. 31, 2007. —Nancy Gordon