LP corner, week of April 19, 2010

Norwegian fund eyes PE

The giant Norwegian Government Pension Fund Global is considering its first foray into private equity, part of a continuing movement by sovereign wealth funds into the asset class.

Norges Bank Investment Management, Norway’s central bank and manager of the Government Pension Fund Global, is assessing opportunities for the fund to invest in private equity and infrastructure within a new investment program aimed at environment-related investment opportunities.

It will issue its recommendations this fall. With about NOK2.6 trillion ($457 billion) under management as of Dec. 31, the sovereign wealth fund manages one of the largest pools of capital in Europe.

The Norwegian Ministry of Finance last year outlined plans for the establishment of the environmental program, saying that about $680 million would be invested in environment-related opportunities in 2010. The total allocated to the program is predicted to reach as much as $3.4 billion over a five-year period.

Sovereign wealth funds are a growing source of capital for private equity funds. Total assets under management of all sovereign wealth funds stand at an estimated $3.5 trillion, representing a 9% increase from one year ago, according to The 2010 Sovereign Wealth Fund Review published in March by alternative asset data provider Preqin.

More than half of sovereign wealth funds (or 55%) are known to invest in private equity, 51% in real estate, 47% in infrastructure and 37% in hedge funds.

Preqin research also finds that another 5% are considering setting a maiden allocation to the asset class. Along with the Government Pension Fund Global, Emirates Investment Authority, the first sovereign wealth fund for all seven states of the United Arab Emirates, anticipates making an allocation to private equity in the future. Bahrain Mumtalakat Holding Co., which currently only makes direct investments, has also been considering an allocation to private equity funds. Expect a decision in the first half of this year.

Of those sovereign wealth funds that invest in private equity, 92% have a preference for buyout funds, according to Preqin. Examples in the Preqin report include SAFE Investment Co.’s $2.5 billion commitment to U.S. buyout fund TPG Partners VI and China Investment Corp.’s $3.2 billion commitment to CIC-JC Flowers Financial Assets.

China Investment Corp. also recently backed European buyout house Apax in an innovative two-part transaction that saw the sovereign wealth fund acquire a 2.3% stake in the buyout shop for an undisclosed sum and also purchase a stake in Apax Europe VII, the firm’s 2007-vintage $15.1 billion fund.

Ireland’s National Pensions Reserve Fund aims to have 15% of its private equity portfolio invested in venture capital. The sovereign wealth fund also allocates 20% to 25% of its private equity portfolio to investments to special situations funds, including distressed debt and turnaround vehicles. —Angela Sormani

University of Michigan pledges to Asia fund, exceeds target

The University of Michigan recently pledged $10 million to the fourth fund of Hong Kong-based SAIF Partners, even as the investor’s actual allocation to private equity exceeded its target.

The University of Michigan’s actual allocation to private equity was 15.5% as of February, ahead of its 12% target, according to a spokesperson.

SAIF invests $10 million to $100 million in growth equity opportunities and buyouts in Greater China and India. The New York State Common Retirement Fund recently committed $100 million to SAIF Partners IV, and the California Public Employees’ Retirement System recently pledged $120 million to the fund.

SAIF Partners, which has offices in Hong Kong and Beijing, China, as well as in Hyderabad, India, plans to invest mainly in expansion-stage, established businesses in China and India. Industries of interest include financial services, retail and distribution, health care, agribusiness, education and business services.

The LP’s commitment continues a run of pledges to international funds. Last year, the university committed $32 million to London-based private equity firm Charterhouse Capital for investments in the United Kingdom and France; $14 million to London-based Close Brothers Private Equity for buyouts of mid-market companies in the United Kingdom; and $15 million to Kayne Anderson Capital Advisors, an energy specialist based in Los Angeles. —Nancy Gordon

Another interim head joins New Mexico

The New Mexico State Investment Council, which has been in turmoil since the pension fund pay-to-play scandal in New York broke about a year ago, has a new interim state investment officer.

The state investment council named Steven Moise as interim state investment officer at their meeting in late March. Moise is currently on the New Mexico Board of Finance and has a long history in New Mexico business and legal communities. His appointment depends on the approval of the full council, which could come this month, a spokesperson said.

Meanwhile, Bob Jacksha has returned to his CIO position at the New Mexico Educational Retirement Board.

New Mexico Gov. Bill Richardson named Jacksha interim state investment officer in the fall, following the resignation of Gary Bland.

Bland resigned in October after learning that the council intended to render a no-confidence vote against him.

Until April, the state investment council had used Dallas-based Aldus Equity Partners as its private equity consultant: Aldus Equity founder Saul Meyer, pleaded guilty in connection with the kickback scheme and is awaiting sentencing..

As of January 2010, New Mexico, with assets of $13.4 billion, has an actual private equity asset allocation of 9.9%, which is within its range of 6% to 12 percent. —Nancy Gordon