LP corner, week of July 19, 2010

Tennessee taps Cambridge as PE consultant

The Tennessee Consolidated Retirement System recently hired Cambridge Associates as a new consultant for private equity and made a total of more than $100 million in commitments to two fund managers.

Cambridge Associates will begin its tenure as the pension’s private equity consultant on Aug. 1 and will help the limited partner identify private equity partnerships and managers. Previously, Strategic Investment Solutions held that position.

The state pension fund committed $80 million to two funds run by distressed debt specialist Oaktree Capital Management. Oaktree Opportunities Fund VIII and its sidecar vehicle Oaktree Opportunities Fund VIIIb will each receive slugs of $40 million. Oaktree Capital will use the vehicles to invest globally in the distressed debt of large, overleveraged companies.

Earlier this year, the $30 billion LP approved a $50 million commitment to Oaktree PPIP Private Fund, earmarked for buying senior CMBS from the Treasury Department using leverage. The pledge was made via the LP’s private equity program. Regarding the LP’s affinity for Oaktree Capital, a recent board document stated, “While we continue to be impressed with Oaktree, we expect this level of manager concentration to be the exception rather than the rule.”

In addition, a $25 million commitment went to venture capital firm Venrock Associates for its sixth fund, which closed recently with $350 in commitments.

Tennessee is a relative newcomer to private equity, making its initial pledge to the asset class just last year. So far, commitments have gone to Draper Fisher Jurvetson, Hellman & Friedman, Khosla Ventures, Oaktree Capital Management and TA Associates.

The LP’s target allocation to private equity is 3%, with a cap of 5 percent. Its actual allocation stands at a little more than 1 percent. —Nancy Gordon

CalPERS had a good year, 11.4 % better than last

The California Public Employees’ Retirement System last week announced a fiscal year gain of 11.4%, exceeding its “long-term annualized earnings target of 7.75%” which CalPERS says it has enjoyed over the last 20 years. Its fiscal year ended on June 30.

“The positive returns over the last year are due to many factors, including the stabilization in the financial industry and the increase in market liquidity,” said CIO Joe Dear in a prepared statement. “Many asset classes have exhibited strength amid signs of stabilization and recovery in the economy.”

With the exception of real estate, all of the asset classes had positive returns for the year.

Dear added: “We’re making good progress as we apply the hard lessons of the financial crisis to improving our investment policies, processes and strategies.”

CalPERS said that it has saved $100 million in fee reductions with external managers, has eliminated low-performing funds from its portfolios and is developing new risk management tools.