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LP Scorecard: Europe Stands Out for Washington Mezzanine

Its most recent commitment to a mezzanine fund and also its most successful to date was made as far back as 1999 to European Mezzanine Fund III LP. That fund posted an IRR of 17.14 percent and multiple of 2.1x for the period.

The 1997 vintage WCAS Capital Partners III LP took second place, posting a 13.08 percent IRR and 1.7x multiple, followed in third place by the 1985 vintage (the oldest mezzanine vehicle in the portfolio) GTCR Capital Partners LP, which posted a 10.81 percent IRR and 1.4x multiple.

The two negative mezzanine performers within the portfolio for the period are the 1997 vintage RSTW Partners III LP, which posted an IRR of -1.19 percent and 0.9x multiple and the 1994 vintage Rice Partners II LP, which posted an IRR of -3.38 percent and 0.9x multiple.

Liz Mendizabal, institutional relations director at Washington State, said that following its 1999 commitment to European Mezzanine Fund III LP, the pension fund decided to “discontinue investing in mezzanine as we felt that those strategies did not fit the return profile we were seeking in private equity.”

However, the 17.14 IRR generated by European Mezzanine Fund III LP for the period exceeds the entire portfolio’s top quartile IRR, which reached 15.57 percent for the period. Top quartile IRR and multiple for the pension fund’s mezzanine investments reached 10.8 percent and 1.65x; bottom quartile was 2.35 percent and 1.1x, and median was 5.7 percent and 1.4x. This compared favorably with the entire portfolio’s top quartile IRR mentioned above; bottom quartile IRR and multiple at 1.91 percent and 1.1x, and median at 7.72 percent and 1.3x.

Washington State is invested in some 270 private equity funds, including buyouts, distressed debt, growth equity, mezzanine, special situations and venture capital. Top performers by IRR for the entire portfolio for the period include the 1997 Menlo Ventures VII LP in pole position, recording an impressive IRR of 135.58 percent and multiple of 4.7x. This is followed by the lucrative GTCR Fund VIIA LP, which posted an IRR of 83.01 percent and multiple of 2.8x for the period.

As of December 31, 2012, total value of Washington State’s private equity portfolio stood at $16.1 billion. Allocation to mezzanine was 0.1 percent; large/mega buyouts accounted for 56.3 percent of the portfolio; small/mid buyouts accounted for 16.5 percent; distressed debt for 6 percent; venture capital/growth equity for 6.9 percent and special situations/multi strategy for 14.2 percent.

For more information on Washington’s performance to September 30, 2012, click here.

Angela Sormani is a special correspondent for Buyouts in London.

10. RSTW Partners III LP

Vintage: 1997

Multiple: 0.9x

IRR: -1.19 percent

 

9. Capital Resource Partners IV LP

Vintage: 1999

Multiple: 1x

IRR: 0.37 percent

 

8. Capital Resource Lenders III LP

Vintage: 1996

Multiple: 1.2x

IRR: 4.33 percent

 

7. Green Mountain Partners LP

Vintage: 1996

Multiple: 1.2x

IRR: 5.62 percent

 

6. Capital Resource Lenders II LP

Vintage: 1993

Multiple: 1.4x

IRR: 5.7 percent

 

5. Green Mountain Partners II LP

Vintage: 1998

Multiple: 1.6x

IRR: 10.25 percent

 

4. EquityLinked Investors LP

Vintage: 1985

Multiple: 2.8x

IRR: 10.78 percent

 

3. GTCR Capital Partners LP

Vintage: 1999

Multiple: 1.4x

IRR: 10.81 percent

 

2. WCAS Capital Partners III LP

Vintage: 1997

Multiple: 1.7x

IRR: 13.08 percent

 

1. European Mezzanine Fund III LP

Vintage: 1999

Multiple: 2.1x

IRR: 17.14 percent