LP corner, week of Oct. 19, 2009

OK Teachers close to replacing Aldus Equity

The Teachers’ Retirement System of Oklahoma has narrowed to three the number of candidates in the running to replace its former private equity advisor, Aldus Equity Partners.

The finalists are Cliffwater, Franklin Park Associates and Grove Street Advisors, according to James Wilbanks, the state pension fund’s executive secretary.

The three candidates will be interviewed at the LP’s Oct. 28 board meeting, after which a selection will be made.

The chosen firm will oversee the private equity portfolio, which has a target allocation of 5 percent. The $8 billion Oklahoma pension fund has already committed $107.5 million to several underlying funds, Wilbanks says.

The pension fund ended its relationship with Dallas-based Aldus Equity in May after the advisor’s founder, Saul Meyer, was charged in connection with an alleged kickback scheme involving the New York State Common Retirement Fund. Earlier this month, Meyer pleaded guilty, but will not be sentenced until the investigation of the case is concluded.

Aldus Equity had managed a $450 million private equity fund-of-funds mandate for the state pension fund.

Wilbanks says that in May that there were no allegations of impropriety on the part of Aldus Equity regarding the work it had done for the Oklahoma pension.

The limited partner chose Aldus Equity to handle its first private equity mandate last year. In the fallout from the Aldus Equity scandal, however, the limited partner has adopted a policy requiring all of its vendors to fully disclose any use of placement agents and third-party marketers, Wilbanks says.

The LP’s private equity program is open to a variety of funds, including buyout and corporate restructuring; venture capital; mezzanine financing; special situations; and secondary vehicles. —Nancy Gordon

Texas pledges $115M to two firms

The $18.4 billion Employees Retirement System of Texas rang in its new fiscal year by pledging a total of $115 million to two private equity firms.

Greenwich, Conn.-based turnaround firm Littlejohn & Co. nabbed $65 million for its Littlejohn Fund IV, which, according to a regulatory filing, has a target of roughly $1.32 billion. Littlejohn invests in mid-sized companies generating revenues of between $150 million and $800 million.

Texas Employees also pledged $50 million to Quantum Energy Partners V, which Quantum Energy Capital closed late last month with $2.5 billion, nearly hitting its $2.75 billion target (See story, page 4). The firm makes investments of $100 million to $400 million in exploration and production companies in the oil and gas sectors.

The state retirement system intends to commit $450 million to $750 million to private equity in its new fiscal year, which began Sept. 1, making between nine and 14 pledges.

The limited partner had an actual allocation of 0.6% in private equity as of Aug. 31, still a long ways from its 8% target for the asset class. Texas Employees made its first private equity pledge in 1998, but did not make its second commitment until 2007. —Nancy Gordon

Virginia commits to turnaround firm

The $46.5 billion Virginia Retirement System recently pledged $70 million to a turnaround firm, marking the limited partner’s fifth pledge of 2009.

Similar to Texas Employees, the pension fund committed to Littlejohn’s fifth fund.

Earlier this year, Virginia committed $150 million to buyout firm Hellman & Friedman’s Hellman and Friedman Capital Partners VII; $150 million to First Reserve Corp.’s 12th fund; $75 million to TA Associates’ 11th fund, a growth-equity vehicle; and $15 million to venture firm Matrix Partners’ ninth fund, according to Jeanne Chenault, a spokesperson for the LP.

As of Sept. 15, the Virginia Retirement System’s private equity portfolio comprised about 8%, or roughly $3.7 billion, of the total fund, below its policy limit of 10 percent. —Nancy Gordon