LP corner, week of Oct. 6, 2008

PSERS pledges $80M to funds

The $33 billion Pennsylvania State Employees’ Retirement System, finding itself 3 percentage points above its target allocation, has re-upped with three general partners. However, it slightly scaled back the level of its commitments.

The pension fund has made the following commitments:

• Up to $50 million to First Reserve Fund XII. First Reserve Corp., Greenwich, Conn., seeks $12 billion for the fund, which has a hard cap of $16 billion. The firm plans to invest from $200 million to $1.5 billion to acquire stakes in a global portfolio of companies in several energy industry sectors. Pennsylvania SERS committed $60 million to First Reserve XI.

• Up to $20 million to Morgenthaler Venture Partners IX. Morgenthaler Venture Partners seeks $400 million for its ninth fund to invest in life science and information technology companies. By August it had gathered $374 million in commitments from 51 backers. PSERS commited $35 million to fund VIII.

• Up to $10 million to Brynwood Partners VI. Brynwood Partners focuses on consumer products, light manufacturing in low-capital-intensive industries, service businesses and specialty retail companies. The Greenwich, Conn.-based firm makes control investments in lower-middle-market companies and acquires companies with enterprise values between $15 million and $125 million.

Brynwood Partners is raising up to $400 million for Fund VI. The firm reached its $250 million target for Brynwood Partners V in 2005. PSERS commited $10 to fund V. —Nancy Gordon

Philly pledges $20M to Blackstone

The City of Philadelphia Board of Pensions and Retirement has continued its relationship with The Blackstone Group, committing $20 million to Blackstone Capital Partners VI, according to Christopher McDonough, chief information officer. The pension fund previously pledged similar amounts to funds IV and V.

The $4.7 billion city pension fund, with 9% invested in private equity, remains well below its target allocation of 12 percent.

“We would hope to reach our target in three to four years,” says McDonough.

Blackstone Capital Partners VI is earmarked for leveraged buyouts, corporate partnerships, growth equity and strategic minority investments around the world. The firm held a first close in August at $7.1 billion. Altogether, the firm seeks $19.5 billion for the fund, which had 76 backers as of mid-August, according to a regulatory filing.

Philadelphia tends to make individual commitments of between $15 million and $30 million, and uses Franklin Park Associates as its advisor and Fairview Capital Partners for funds of funds.

Philly looks at opportunities in Eastern Europe, Asia

Meanwhile, the City of Philadelphia Board of Pensions and Retirement is looking to build a globally diversified portfolio, and has its eye on opportunities in Eastern Europe, including the Czech Republic, Romania and Bulgaria, as well as in Japan, South Korea and Australia.

The city pension fund also plans to steer clear of what it considers to be emerging markets in Asia.

Philly has 19% of its alternative portfolio in Western Europe; 1% is in Latin America, as part of a global fund; and it also has some exposure to Australia and Turkey.

The first foray into Eastern Europe or Asia would probably be through a roughly $20 million commitment to a fund of funds, and would probably not be made any sooner than the next two years.

Past commitments that the city pension fund has made overseas include Edinburgh, Scotland-based SL Capital Partners European Strategic Partners I and II, European funds of funds earmarked for international investment opportunities. The LP was the first major investor to sign on to ESP I.

The pension plan also committed $21 million to The Carlyle Group’s Carlyle Europe Partners III, a 2006-era fund which invests in leveraged buyout transactions in Europe. —Nancy Gordon