LP notes, week of June 30, 2008

NY closes in on emerging manager adviser

The $155 billion New York State Common Retirement Fund is in the final stages of its search for a manager of its private equity emerging manager program, according to Thomas DiNapoli, the state comptroller and sole trustee of the fund.

“We are weeks away from making a choice, and the interviews are moving along. We have an adequate pool to choose from,” DiNapoli said at a June 11 meeting. The request for proposal was issued in November 2007 and responses were due in January. A decision will likely arrive by the end of the summer.

The pension fund expects to allocate $1 billion over the next several years to emerging managers. The program seeks exposure to newer private equity partnerships with assets of less than $750 million that have a hard time accessing large institutions.

The limited partner is looking to hire one or more advisers that will invest in emerging managers across multiple strategies. That includes fund commitments, buying interests in general partnerships, and investments alongside emerging managers such as co-investments. The mandate emphasizes identifying and investing in historically undercapitalized segments of the private equity market.

Separately, DiNapoli, who took office a year ago, said that he is in preliminary discussions with Canadian companies, who he hopes will relocate to New York state and bring jobs with them.

“The negative of the [U.S.] dollar being weak produces opportunities,” he said. —Nancy Gordon

Alameda County opens coffers to PE

The $5.3 billion Alameda County Employees’ Retirement Association launched its maiden voyage into private equity with the approval earlier this month of a 10% allocation to private equity and alternative strategies.

By earmarking a portion of its assets to the alternatives, the Oakland, Calif.-based county pension fund expects to increase returns on capital by 40 basis points. The change was blessed by Strategic Investment Solutions, the limited partner’s investment consultant, as well as in-house staff.

To achieve the 10% target, the LP plans to peel off its allocation to United States-based public equities by 4%, its allocation to fixed income by 4% and its real estate investments by 3 percent. At the same time, the LP expects to increase its exposure to international public equities by 1 percent.

Projections call for the new mix to return more than the previous combination, bringing the annual return to 8.33 percent. —Nancy Gordon

Texas School Fund seeks PE adviser

The $24.7 billion Texas Permanent School Fund recently issued an RFP seeking its first private equity adviser.

The limited partner expects the adviser to create a diversified private equity portfolio using a separate account structure, and the adviser could also manage a fund of funds for the pension plan. The mandate may be either discretionary or non-discretionary, and venture capital, buyout funds, mezzanine funds and distressed debt may all be included.

Almost two years ago, the Texas Permanent School Fund approved a 6% allocation to private equity, with a minimum of 3% and a maximum of 8 percent. Proposals are due July 8, with finalists making their presentations on Nov. 17.

The LP intends to make its selection on Nov. 21, with the contract starting on Jan. 1. The initial contract will end in August 2012 but can be renewed. —Nancy Gordon

LA Pension to increase commitments

The Los Angeles Fire and Police state pension fund plans to pick up its investment pace with private equity investments, according to a report by Private Equity Insider.

General Manager Michael Perez noted that the $15.2 billion pension plan has committed $1.6 billion, or 10.6%, to alternatives, and it is unofficially shooting for a 15% commitment level.

The pension plan’s investment staff and advisors believe it must overshoot its official 10% allocation level now to avoid playing catch-up later, when fund distributions pick up.

Perez didn’t specify a time frame in which the system would try to make additional investments in private equity funds, but indicated that it would have to commit about $670 million more to meet a 15% target allocation.

In comparison, other public pension plans have recently slowed or temporarily halted their private equity programs due to over-allocations and falling market values of their portfolios.