LP corner, week of March 29, 2010

Illinois Teachers’ climbs toward target with two pledges

The $32 billion Teachers’ Retirement System of the State of Illinois recently pledged $225 million to two private equity firms in its effort to reach its 10% target allocation to the asset class.

The state pension fund made a $100 million pledge to Oaktree Opportunities Fund VIII and a $50 million commitment to Oaktree Opportunities Fund VIIIb, a sidecar vehicle. A $75 million slug went to Veritas Capital Fund IV, said CIO and Acting Executive Director Stan Rupnik.

The state’s private equity program is expected to reach its target allocation of 10% in late 2010, according to an October 2009 pension fund document. The plan for the fiscal year, which began on July 1, calls for the LP to commit between $700 million and $1.2 billion over the next year to private equity firms.

The state pension fund has also decided to issue a request for proposal for a private equity consultant and anticipates choosing the consultant at the May or June board meeting, Rupnik said. The current consultant, Pacific Corporate Group, will be permitted to rebid, he said. —Nancy Gordon

Guardian Life likes small, mid-market funds in 2010

Guardian Life Insurance Company of America is zeroing in on the smaller end of the buyout market in its quest to commit $200 million to the asset class in 2010.

David Turner, managing director and head of private equity, said on the sidelines of Private Equity Insider’s Emerging Markets Investor Forum earlier this month that although he hasn’t yet determined which general partners will garner pledges, he’s looking at buyout funds that range in size from $200 million up to about $2 billion, and he is also interested in secondaries.

Guardian Life’s pledges average $15 million to $25 million, with special situations funds sometimes getting pledges of $30 million.

Turner noted that his portfolio is about 65% buyouts and 25% special situations, with the rest going to venture capital. —Nancy Gordon

Alaska plunges into mezz investing

The Alaska Permanent Fund Corp. recently approved $500 million worth of mezzanine pledges, as the limited partner moves into a newly established area of investment for the state fund.

The LP recently approved a $250 million pledge to Audax Group’s third subordinated debt fund, Audax Mezzanine Fund III.

The $750 million-targeted mezzanine fund has a mid-market focus, with an average investment size of $20 million. In addition, Oaktree Capital Management received a slug of $250 million from Alaska for its Oaktree Mezzanine Fund III, which has a target of $2.5 billion and is earmarked to help fund leveraged buyouts of companies with enterprise values from $150 million to $750 million.

The LP is looking to invest about 1%, or $340 million, of its assets in subordinated debt, an allocation similar in size to its distressed debt allotment, according to board documents.

In May, Alaska approved a resolution that includes a $500 million commitment to two advisors for its fiscal year 2010, which began July 1. The amount will be divided between HarbourVest Partners, which oversees a separate account, and Pathway Capital Management, which manages two private equity portfolios for the LP.

The Alaska Permanent Fund’s target allocation to private equity is 6%, although the actual private equity allocation stood at 2.5%, as of Jan. 31. —Nancy Gordon