LP corner, week of Jan. 18, 2010

Louisiana plows $80M into two funds

The $7.6 billion Louisiana State Employees Retirement System recently committed $40 million apiece to two funds, Newstone Capital Partners II and Drug Royalty II, according to a spokesperson from the state pension fund.

Newstone Capital, which provides mezzanine capital to private equity sponsors, is targeting $900 million for Newstone Capital Partners II. Inwest Investments’ Drug Royalty II is a $500 million-targeted fund earmarked to acquire pharmaceutical royalty interests, which are streams of future cash flows tied to the sale of a product.

As of Sept. 30, Louisiana had hit its target allocation to private equity of 10%, at the center of its range of 7% to 13 percent.

The limited partner mostly commits to funds of funds managed by such firms as Adams Street Partners, HarbourVest, Mesirow Financial, Pantheon, Parish Capital, Pathway Capital Management and Siguler Guff. —Nancy Gordon

Pa. SERS lowers target

Although it said it has been happy with the recent return generated by its private equity portfolio, the Pennsylvania State Employees’ Retirement System said that it will reduce its private equity target from 14% to 12% as a result of a strategic shift into fixed income investments. Its actual allocation stands currently at 22%, suggesting that the state pension fund may have trouble reaching that goal in the near term, absent a secondary sale.

Noting that private equity, venture capital and real estate returns lag by one quarter, meaning the numbers available for those asset classes are for the previous quarter ended June 30, CIO John Winchester said in a prepared statement: “We were particularly pleased to see private equity performance begin to recover as quickly as it did. Every indication is that the private equity portfolio has continued to gain value since June 30. If that trend holds, it should aid the fund’s full-year performance.”

The LP has about $23.7 billion in assets. —Nancy Gordon