Maine PERS PE co-invests post highest returns; mulls pledge to Carlyle infra

Maine Public Employees Retirement System’s private equity co-investment program produced the highest returns among all co-investment programs, documents obtained via public-records request by Buyouts show.

The 16 PE co-investments, accounting for almost half (49 percent) the $459 million total co-investments, produced an IRR of 23 percent as of Sept 30, 2018.

By comparison, Maine’s infrastructure co-investments produced an IRR of 15 percent and real estate co-investments 5 percent in the same period.

Expanded program

Maine’s co-investment program has expanded since inception in 2013, when the investment staff was authorized to commit up to $200 million in PE and real-assets co-investments.

The co-investment program expanded to $300 million in 2015 and was granted a 5 percent allocation of the total program in 2017.

The total co-investment portfolio had an allocation of 3.1 percent across 31 commitments, as of Sept 30.

Maine’s co-investment program had saved $32 million in fees since inception, documents said.

As of Sept 30, 2018, Maine’s total co-investment portfolio, composed of PE, infrastructure, real estate, natural resources and alternative credit, produced an IRR of 19 percent and a return of 1.33x on invested capital since inception.

Last year, Maine committed $300 million across seven funds from Kelso & Co, Paine Schwartz Partners, TCV, H.I.G. Capital, Hellman & Friedman, Thoma Bravo, and Riverside Partners.

Two commitments, to Riverside and H.I.G. funds, were finalized at $10 million less than the board had approved, documents said.

Maine’s PE portfolio was diversified across IT (25 percent), financial services (23 percent), consumer (16 percent), industrial (12 percent), healthcare (11 percent), energy (7 percent) and other (6 percent), as of Sept 30. The portfolio was allocated to 30 GPs across 85 funds.

Carlyle infra

Maine is mulling an investment in Carlyle Group’s global infrastructure opportunity fund, targeting $2.5 billion.

Carlyle’s fund will invest in middle markets in North America, Europe and OECD Asia. It will target leveraged buyouts, joint ventures with strategic partners and privatization of government-owned entities in global energy and power, transportation and water and agriculture sectors.

Carlyle’s team includes Co-Heads Andrew Marino and Peter Taylor, Managing Directors Richard Hoskins and Ferris Hussein, and Vice Presidents Lauren Beshore and Caleb Powers.

Maine’s infra portfolio had a 10 percent allocation and was spread across 33 funds and 13 managers, as of Sept 30.

The pension system expected to cut the the number of GP relationships to almost half (between five and eight) and focus on commitments to “highest conviction” managers, documents said.

Maine in 2018 committed over $425 million to infrastructure funds from KKR, Ares Management, Baring Private Equity Asia, EQT and Cube Infrastructure Managers.

Action Item: Read more on Maine’s investments here https://bit.ly/2MAAZta