LP corner, week of April 5, 2010

Penn. State LP re-ups, despite overallocation

The Pennsylvania State Employees’ Retirement System recently pledged $40 million to two private equity firms for follow-on investments, even though the pension fund is still above its target allocation to the asset class.

The limited partner committed up to $25 million to J.H. Whitney VII and up to $15 million to Advent Latin America Private Equity Fund V.

J.H. Whitney invests mainly in small and mid-market buyouts and recapitalizations of growth-oriented U.S. companies in the consumer products, specialty retail, health care services, specialty manufacturing and business services sectors.

Penn SERS previously committed to J.H. Whitney Funds III through VI.

Advent International’s Latin American fund is a $2 billion-targeted pool that will take control stakes in mid-market businesses, mainly in Mexico, Brazil and Argentina. The state pension fund committed up to $30 million to the firm’s fourth Latin American fund, which closed in 2007 with $1.3 billion.

In January, Penn SERS Nicholas Maiale said in a prepared statement that the board intends to maintain, “on a highly selective basis,” core relationships with top-tier alternative investment managers, even as the LP gradually reduces its exposure to alternative investments.

The $24 billion pension fund reduced its private equity target allocation from 14% to 12% last year. However, Its actual allocation stood at more than 23%, as of Dec. 31, according to a spokesperson. —Nancy Gordon

Tenn. pledges to mortgage-backed securities fund

The $29 billion Tennessee Consolidated Retirement System recently approved a $50 million commitment to Oaktree PPIP Private Fund, earmarked for investments in mortgage-backed securities. As of January, Oaktree Capital had raised $425.8 million from Tennessee and 38 others investors to invest in mortgage-backed securities through the government’s PPIP (public-private investment program) plan.

The pledge represents the fifth private equity commitment for the limited partner, which obtained legislative approval to invest in the asset class in 2008 and made its first pledge just last year. Previous pledges went to a mix of venture capital and buyout funds managed by Draper Fisher Jurvetson, Hellman & Friedman, Khosla Ventures and TA Associates.

The addition of the new pledge brings the LP’s private equity portfolio to $225 million, or less than 1% of total assets.

Tennessee’s target allocation to private equity is 3%, with an upper limit of 5 percent. —Nancy Gordon

N.C. hires Credit Suisse for in-state program

The North Carolina Retirement System has tapped Credit Suisse to manage the North Carolina Innovation Fund, which is earmarked for investments in businesses with significant operations in the state.

The $230 million fund will target high-growth industries, which could include life sciences, technology and clean energy. The capital will be invested over three to five years and can go to direct investments, co-investments and funds of funds.

A formal roll-out of the fund across the state will occur in late April and early May, said a state pension fund spokesperson.

North Carolina has a target allocation to alternatives, which includes private equity and hedge funds, of 4.5 percent. The actual allocation stood at 5.4%, as of Aug. 31. North Carolina is one of only three states that use a sole fiduciary to oversee its pension fund. The others are New York and Connecticut. —Nancy Gordon