LP corner, week of March 22, 2010

Neuberger Berman vehicle snubs U.S. funds

Neuberger Berman’s European listed vehicle NB Private Equity Partners Ltd., previously known as Lehman Brothers Private Equity Partners, is a rarity among listed vehicles in Europe in that it has cash to commit to new funds.

But it anticipates reducing its pace of U.S. fund commitments in the months ahead to focus on building up its exposure to Europe and the rest of the world.

Peter Von Lehe, managing director of Neuberger Berman, said the aim of the vehicle has been to commit capital steadily across investment cycles. Along with European and international funds, sectors of interest include secondaries, distressed funds and small-cap and mid-cap buyout funds. The vehicle also has a small appetite for venture funds.

NBPE is listed on both the Euronext Amsterdam and the specialist fund market of the London Stock Exchange. As of Jan. 3, the vehicle’s total private equity exposure stood at $675.9 million, which includes $155.3 million in unfunded commitments. North America-based funds account for about three-quarters (78%) of these assets, followed by Europe (18%) and the rest of the world (4%).

Funds backed by NBPE in the United States include American Capital Equity II, Apollo Investment Fund V, Clayton, Dubilier & Rice Fund VII, J.C. Flowers II, KKR 2006 Fund, KKR Millennium Fund, NB Crossroads Fund XVIII and Thomas H. Lee Equity Fund VI. In Europe, investments include Clessidra Capital Partners, Doughty Hanson & Co IV, Investitori Associati III and Terra Firma Capital Partners III. —Angela Sormani

Another Canadian LP switches focus to directs

The Public Sector Pension Investment Board is the latest Canadian pension fund manager to express a preference for direct private equity investing.

Speaking at the SuperReturn conference in Berlin last month, Jim Pittman, vice president-private equity of PSP Investments, said that, in light of the disappointing performance of mega-buyout funds, the board plans to halve the number of relationships it has with general partners over the next three years. The fund manager will instead focus on leading direct investments or co-investments with a select number of GPs.

The Ottawa-based investor has committed to 25 GPs, 18 of which manage buyout funds. All except two of those 18 have provided lackluster returns to date, according to Pittman. PSP Investments only invested in two new funds during 2008 and 2009, and both were spin-out or first-time funds.

In 2009, PSP Investments had $4.2 billion invested in private equity funds and $3 billion allocated but not yet committed; it also had a total of $1.3 billion invested in co-investments and co-lead deals.

PSP Investments is following the leads of its Canadian pension fund peers Alberta Investment Management Co., OMERS Private Equity and Ontario Teachers Pension Plan, all of which have demonstrated an increased commitment to direct investments with less focus on fund commitments.

PSP Investments started its private equity allocation program in 2005, and its primary goal has been to back global buyout funds and to pursue co-investments alongside them. —Angela Sormani

Portfolio Advisors wins Los Angeles Fire assignment

The Los Angeles Fire & Police Pensions has decided to hire Portfolio Advisors as a private equity consultant to fill the hole left last year when it fired Aldus Equity Partners in the wake of a pay-to-play scandal involving kickback schemes at New York and New Mexico state pension funds.

The adviser will help the $12.5 billion pension fund build toward a 10% target allocation, from its current perch at 5.7 percent.

The board has approved a three-year contract for Portfolio Advisors, General Manager Michael Perez said. Other finalists in the search included Cliffwater, Credit Suisse Customized Fund Investment Group, Hamilton Lane and Stepstone Group.

According to board documents, Portfolio Advisors was the only firm to suggest a sliding scale fee schedule that permits a lower fee being paid in years when fewer opportunities exist in the market or when the board slows its investment pace.

The private equity program of Los Angeles Fire and Police Pensions has two components, a core part that includes venture capital, buyout and special situation funds; and a specialized component earmarked for commitments to first or second time funds; sub-$500 million funds; firms that are majority owned by minorities or women; or funds that focus on specific industries or geographies. Roughly 80% of new commitments go to the core portfolio and 20 percent to the specialized one. —Nancy Gordon

CalSTRS names new PE investment chief

The California State Teachers’ Retirement System (CalSTRS) has named Margot Wirth as its new head of alternative investments.

The position had been empty since early last year, when longtime alternatives chief Réal Desrochers resigned. Wirth and Seth Hall—both private equity portfolio managers—had been serving as interim co-heads.

Before Wirth joined CalSTRS in 2001, she was a valuation consultant with PricewaterhouseCoopers in New York and San Francisco. She also served as a vice president at an environmentally conscious residential real estate developer in Washington, D.C.

CalSTRS currently has nearly $17 billion in private equity assets under management. It has very little hedge fund exposure, so the “alternatives” job mostly involves private equity. The LP’s private equity portfolio accounts for about 13% of the $132.6 billion CalSTRS investment portfolio, as of Feb. 28.

As for ex-head Desrochers, he’s said to be back in Sacramento, Calif., after a short stint with Advanced Equities in Italy. No word yet on his future plans. —Dan Primack