LP corner, week of Sept. 15, 2008

LPs energized by First Reserve’s 12th fund

First Reserve Corp.’s 12th energy fund has sizzled this summer, garnering strong interest from the usual suspects.

At least eight return backers recently committed more than $1.3 billion. The Greenwich, Conn.-based firm is targeting $12 billion for the fund, with a $16 billion hard cap. Thus far, the firm has raised more than $4.5 billion in commitments from 82 investors for fund XII, according to a recent regulatory filing.

The largest slug in the August surge came from the Pennsylvania Public School Employees’ Retirement System, which pledged up to $250 million to First Reserve Fund XII. This marked a step-up from its first commitment of $200 million to fund XI.

The Massachusetts Pension Reserves Investment Management Board re-upped to the tune of a $200 million commitment, its largest pledge to the firm yet.

In one of its largest single private equity commitments, the Los Angeles County Employees’ Retirement Association pledged up to $100 million in mid-August. This is the third time that the LP has backed First Reserve, having committed $50 million to fund X and $60 million to fund XI.

In addition, the Teachers’ Retirement System of Louisiana made its second pledge to the GP by committing $100 million. Also in August, the $11.4 billion Los Angeles City Employees’ Retirement System pledged up to $25 million to the fund.

The smallest of the August slugs came from Colorado Fire & Police Pension Association, which re-upped with $15 million.

First Reserve buys stakes in worldwide companies in a variety of energy industry sectors, seeking investments ranging from $200 million to $1.5 billion. —Nancy Gordon

Secondary prices drop

Secondary prices for LP interests have dropped in the first half of 2008, according to a new Cogent Partners study of the secondary private equity market. Those results seem like common sense—given the deterioration of the credit markets and the economic slowdown—but they come after those same prices somehow held near-steady during the second half of 2007.

In general, the average bid for all secondaries was at 84.7% for the first half of 2008. This mostly mirrors public equity value declines, once leverage is accounted for.

The study analyzed about 500 bids that Cogent Partners received on more than 200 funds marketed in the first half of the year. Just over half of the funds include buyout vehicles, while about 31% were VC funds. —Dan Primack

PSERS jumps on Nordic Capital bandwagon

The Pennsylvania Public School Employees’ Retirement System embarked on a new relationship in mid-August when it committed up to $221 million to Nordic Capital Fund VII.

Stockholm-based Nordic Capital seeks about $5.2 billion for fund VII, with a hard cap of $6 billion. As of March 2008, the firm had commitments of roughly $4.5 billion. The firm makes control investments in Scandinavian health care, industrial and consumer discretionary sectors.

Since its inception, Nordic Capital’s funds have earned overall net returns of 46%, and achieved an investment multiple of 2.07, while sustaining no capital losses, according to a State of Rhode Island and Providence Plantations Investment Commission document that also states fund VII is likely to be oversubscribed. All Nordic Capital’s existing clients have chosen to re-up in fund VII.

Other LPs backing Nordic VII include, in order of the size of their commitments, are Virginia Retirement System ($136 million commitment); Pennsylvania State Employees’ Retirement System (up to $104 million); Los Angeles County Employees Retirement Association ($73.9 million); Public Employees Retirement Board of New Mexico ($25 million); and the Employees’ Retirement System of Rhode Island ($23 million). —Nancy Gordon