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LP notes, week of Feb. 11, 2008

CalPERS backs emerging managers


California Public Employees’ Retirement System added $350 million to its emerging managers investment allocation last week, as it announced that it backed fund of funds FIS Group and public equity investor Redwood Investment Management.

The state pension fund defines an emerging manager as a firm with less than $2 billion of total assets under management.

CalPERS invested $150 million in FIS Group, an emerging fund of funds. The Philadelphia-based firm has already invested in nine funds, including Atlanta Life Investment Advisors, Paradigm Asset Management Company, AH Lisanti Capital Growth, OakBrook Investments, DSM Capital Partners, Mastrapasqua Asset Management, Moody Aldrich Partners and Rushmore Investment Advisors.

Five of the nine investments FIS Group has made so far are into either African American-owned firms or woman-owned funds, according to the CalPERS statement.

“FIS will give us access to a larger number of skilled emerging firms to generate solid investment returns and reflect the diversity of the market,” CalPERS Chief Investment Officer Russell Read said in a prepared statement.

The $200 million that CalPERS invested in Redwood Investment Management is part of the pension fund’s Manager Development Program II and the program’s second investment to date. The state pension fund’s previous investment through the program was a $100 million injection into Piedmont Investment Advisors in March 2006. —Alexander Haislip

CalPERS sells portfolio to five investors

The California State Employees’ Retirement System has sold a portfolio of legacy private equity fund commitments reportedly for about $3 billion to five investors, as reported late last week by Financial News Online US.

The sale is believed to be the largest secondaries fund divestment of its kind.

The syndicate that bought the portfolio includes Oak Hill Investment Management, Conversus Capital, Lexington Partners, HarbourVest and Pantheon Ventures.

CalPERS sold the portfolio, which is believed to include at least 50 funds, as part of a restructuring of its private equity program. Financial News reported that the state pension fund mandated UBS as a third-party administrator to sell the portfolio more than a year ago after it started a restructuring of its private equity program in 2005.

“When we started looking at this deal we already had a mature cash-generating portfolio in a sweet spot on the J-curve but to stay there we needed to continue acquiring high quality seasoned fund investments, in particular in the area of special situations, distressed and venture,” said Bob Long, CEO of Conversus Asset Management, which manages Converus Capital’s portfolio.

He added: “This was a cash transaction as opposed to stock, but we have the flexibility to fund our acquisitions through a global revolving credit facility provided by Citigroup which we expect to draw on for this deal. This acquisition maintains the vintage diversification of our portfolio and significantly increases our exposure to special situation and venture assets, in line with our stated portfolio composition goals.”

A first closing of the acquisition is expected by the end of March 2008. —Alastair Goldfisher