Montana to target small-market funds with future commitments

  • Montana to be selective in committing to large-market funds
  • Debt, Asia-focused funds also being considered
  • Portfolio netting 12.38 pct IRR since inception

Montana Board of Investments will lay out its private equity investment strategy at its meeting later this week, according to a presentation released by the $11.1 billion public-pension system.

As it has in previous years, Montana will be selective in its commitments to larger PE funds, which tend to pursue more expensive deals. Large-cap buyout strategies offer fewer avenues to add value to companies, the presentation says.

The bulk of the retirement system’s commitments in recent years went to small and mid-market buyout funds, including those managed by firms like Angeles Equity Partners and Gridiron Capital.

Shying away from megabuyout funds goes hand in hand with the retirement system’s efforts to shift more of its program toward lower-mid-market funds, which tend to be more aligned with their investors and purchase new assets at lower costs, according to the presentation. Montana will also shift more commitments to direct-lending funds, specifically those providing credit to small and medium-sized businesses with limited access to capital.

The retirement system’s recent commitment activity includes a fund that seems to fall into both categories — offering debt to small and lower mid-market businesses. In August, Montana committed as much as $40 million to a new fund raised by CapitalSpring, which provides loans to fast-service restaurants and franchises that are unable to obtain bank financing.

While Montana plans to focus its private equity investment effort on North America, it will also selectively add international and emerging-market managers, specifically in Asia, the presentation shows.

Montana’s second largest relationship with a private equity manager, measured by the value of its investments, is with Axiom Asia Private Capital, a funds-of-funds firm focused on Asia-Pacific investments. Its largest relationship is with Adams Street Partners.

Montana’s PE portfolio was valued at $1.15 billion as of Aug. 31. Since inception, the program’s returned a net internal rate of return of 12.38 percent.

Action Item: For more on Montana’s PE program, visit