Maryland Triples PE Target, Unveils Three Pledges Totaling $235M

The Maryland State Retirement and Pension System recently tripled its target allocation to private equity and backed up that enthusiasm with three commitments totaling more than $200 million. The latest pledges offer the limited partner exposure to buyouts in the Southwest United States, the global secondaries market and a global mega-fund.

The pension fund, which has roughly $33 billion in assets under management, raised its target allocation to private equity to 15 percent from 5 percent, funding the increase from its public equity program. The LP has no set pace for reaching the target, although it will take a number of years, Dean Kenderdine, executive director, told Buyouts. As of Sept. 30, the actual private equity allocation was 2.1 percent.

Meantime, the LP recently pledged a total of $235 million to three private equity firms. Commitments went to mid-market buyout shop Brazos Private Equity Partners’s Brazos Equity Fund III ($35 million); fund-of-funds and secondary manager HarbourVest Partners’s Dover Street VII ($100 million); and mega-buyout shop TPG Capital’s TPG Partners VI ($100 million).

Brazos Private Equity Partners closed Brazos Equity Fund III with more than $700 million to buy small to medium-size family-controlled businesses in the southwestern United States, well above an initial target of $600 million. Dover Street VII LP, a HarbourVest Partners global secondaries vehicle, has reportedly surpassed its $2 billion fundraising target, according to sister Web site peHUB, but has not set a final closing date. The funds-of-funds manager buys holdings in existing private equity funds in small to middle-market partnerships in the United States, Europe, Latin America, Asia and emerging private equity markets.

TPG Partners VI is targeting $15 billion to make buyout and growth capital investments in the United States, Europe and Asia in large companies in the business and financial services, media, pharmaceutical and biopharmaceutical industries. Most of the investments will be for turnarounds of underperforming companies. TPG Capital will commit at least $500 million of its own money to the vehicle. Backers for the latest fund include the Los Angeles City Employees’ Retirement System ($25 million); the Pennsylvania Public School Employees’ Retirement System ($400 million); and the Washington State Investment Board (up to $750 million). According to the Oregon Employees’ Retirement Fund, TPG Partners IV (vintage 2003) had a total value multiple of 1.54x and an IRR of 25.1 percent, as of June 30, 2008.

Maryland’s program allows for primary commitments, fund-of-funds investments and other kinds of investments recommended by Altius Associates, its private equity consultant. The portfolio consists mostly of buyout and venture funds, but the LP also backs funds used for growth, distressed (control and non-control), mezzanine, secondary, and energy and natural resources investments.