Montana to ease secondary-market sales in the near term

  • Retirement system sells $15 mln stake in Montlake Capital fund
  • Montana previously unloaded stakes of Madison Dearborn, Summit funds
  • PE portfolio netting 12.2 pct IRR since inception

Montana Board of Investments may ease up on its unloading of private equity funds stakes on the secondary market, Executive Director David Ewer told Buyouts.

“Probably not so much in the near term,” Ewer said. “It’s probably a balance of where we’ve put our efforts. Most of our effort is to continue expanding relationships with the partnerships we think are the best fit.”

Firms that are “no longer part of our longer-term strategy” remain candidates for a secondary sale, Ewer said, adding that “the idea is to concentrate on the names that fit our overall vision.”

The $10.4 billion retirement system recently sold its stake in Montlake Capital’s second fund, its February meeting materials show. Montana’s $15 million commitment to the 2007 vintage fund was netting a 5.29 percent internal rate of return and 1.3x multiple through the end of the first quarter, according to pension documents.

Montana has engaged the secondary market to unload segments of its PE portfolio. The system last year netted $26.2 million of proceeds when it sold its holdings in Summit Partners and TA Associates funds. In 2014, it sold stakes in eight fund partnerships managed by firms like First Reserve and Madison Dearborn.

Recent commitment activity suggests Veritas Capital Management will be part of Montana’s overall vision moving forward. Montana recently allocated $25 million to the firm’s sixth flagship fund, pension documents said. Veritas VI is expected to raise as much as $3.5 billion, Buyouts has reported.

In addition to its recent investment activity, the system hired Emily Kovarik as an alternative-investments analyst. Kovarik will be responsible for monitoring fund managers in the PE and real estate space, Ewer told Buyouts.

Kovarik was previously CFO of Montana Community Foundation, a $78.9 million philanthropic group in Helena. The foundation had a small allocation to PE, valued at a little less than $3.7 million as of June 30, its most recent independent audit shows.

In a recent meeting, Portfolio Manager Ethan Hurley told the board he was in the process of bringing on a new staffer. While staff wasn’t necessarily overworked, managing the state’s $1.1 billion PE portfolio “takes a lot of horsepower,” Hurley said, according to meeting minutes.

Analysts are “expected to do a lot of due diligence on prospective partnerships,” Ewer told Buyouts. “They’re assigned a current list of managers and it’s onsite, some, and a lot of it is coming to Helena.”

Montana held 11.1 percent of its assets in private equity at year-end, according to pension documents. The PE portfolio has netted a 12.2 percent IRR since inception.

Action Item: More about Montana and its portfolio: