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LP Scorecard: Kentucky-fried returns

Kentucky Retirement Systems has come under scrutiny — from an internal audit showing that the institution wasn’t checking its capital calls to general partners, to being ranked the second-most underfunded state pension in the U.S. by Bloomberg.

To avoid the former and help the latter, KRS put together an investment-operations team to review all outgoing capital calls.

On the investment-performance side of things, Ares Management, MatlinPatterson Global Advisors and Black Diamond Capital Management had the bottom three funds for the system.

Ares Special Situations Fund IV had the lowest IRR for Kentucky at -56.6 percent. The turnaround-focused pool closed last year, so it’s in the early days of its J-curve period.

BDCM Opportunity Fund IV rounded out the bottom three with a -13.9 percent IRR. Black Diamond’s fund is also a 2015 vintage.

MatlinPatterson Global Opportunities Partners II, a 2003 fund, was producing a -22.1 percent IRR. This fund has little or no runway left.

On the flip side of the coin, Vista Equity Partners had the top performing fund. Vista’s third flagship generated an IRR of 30.1 percent, while also providing KRS with its second-highest distributing fund by percentage of cash in at 218.9 percent.

MatlinPatterson’s sophomore vehicle flopped, but its maiden fund did just fine. The 2001 vintage produced a 29.8 percent IRR to go with a robust 175.7 distribution percentage. Institutional Venture Partners, a specialist in growth equity and venture capital, came in third with its 12th primary fund putting up an IRR of 26.5 percent.

KRS’s private equity portfolio contains 72 unique active funds, which combine for $3.3 billion in commitments, $3.2 billion drawn down and $2.8 billion in distributions. That gives the system an 87.5 distribution percentage as of March 31, 2016.

Action Item: Download LP Scorecard table as a spreadsheet: http://bit.ly/2aL7xxB