Montana Pledges $50M; Approaches 12% Target

The Montana Board of Investments recently promised $25 million each to distressed debt and energy-focused fund managers as the $6 billion pension fund approaches its 12 percent target to private equity.

Greenwich, Conn.-based Black Diamond Capital Management will use its capital slug to make distressed debt investments through its latest fund, BDCM Opportunity Fund III. The firm provides debt and equity for mid-market buyout, project finance, start-up and real estate deals.

Energy Investors Funds‘s $25 million commitment will go to its United States Power Fund IV vehicle, which is earmarked to invest in sectors including electricity generation and transmission, as well as other energy-related services. The firm, which has offices in Boston, New York and San Francisco, usually takes control stakes and sometimes provides the opportunity to co-invest alongside its funds.

Last year, the Montana Board of Investments pledged to non-control distressed debt funds Centerbridge Special Credit Partners LP and Oaktree Opportunities Fund VIII LP.

The $6 billion limited partner has a target allocation to private equity of 12 percent, with a range of 9 percent to 15 percent. As of April 30, the limited partner’s actual private equity allocation was approaching 12 percent. Buyout funds comprise almost half of the LP’s private equity portfolio, with the remainder split among the venture capital, distressed, special situations and mezzanine subgroups. Geographically, the portfolio is mostly U.S.-based, with about 14 percent of the LP’s private equity investments dedicated to Europe and 5 percent to Asia.

Although the program commits mostly to direct private equity funds, it also steers capital to funds of funds and secondary vehicles. However, according to a pension fund document, Montana will, in the future, likely limit its use of funds-of-funds managers to accessing international private equity and domestic venture capital, and will probably make fewer secondary commitments.