NYS Common backs Blackstone’s long-term capital vehicle

  • New York’s state pension chips in $300 mln
  • New long-term fund had raised $3.4 bln toward $5 bln target
  • Blackstone began pitching long-term fund in 2014

Count New York State Common Retirement Fund among the limited partners for Blackstone Group’s long-term private equity vehicle, an investment disclosure released by the public pension said.

NYS Common contributed $300 million to the $3.4 billion Blackstone Core Equity Partners had raised through the end of September. The pension finalized its commitment on Sept. 15.

Blackstone initially marketed the fund to a select group of its most sophisticated investors, firm co-founder Steve Schwarzman said on an April earnings call. South Korea’s National Pension Service backed the fund earlier this year, Private Equity International reported.

The core fund takes less risk than Blackstone’s flagship buyout funds and can hold investments for longer than traditional buyout funds, which typically wrap their holding periods after 10 to 15 years.

“We initially set our target of $5 billion; we’ll be over that,” Schwarzman said.

Blackstone began discussing a long-term fund with its investors in 2014, Reutersreported. The core fund will take an approach similar to Warren Buffett’s Berkshire Hathaway, which operates as a holding company rather than a buyout fund.

“The trick is to keep the bar very, very high in terms of the quality you’re buying,” said Senior Managing Director and Chief Financial Officer Michael Chae in a call with analysts earlier this year.

“That may lead to somewhat higher multiples. But if you’re going to hold something for 20 years, the entry multiple and exit multiple are much less important than if you’re holding them for a shorter holding period. And what becomes important is your ability to drive organic growth through that period of time.”

Other firms have also sought capital for longer-term vehicles. Earlier this month, Carlyle Group said it had raised $3.6 billion for its first long-dated PE fund, $1.1 billion of which was already invested. In February, Bloomberg reported that CVC Capital Partners had raised almost $5 billion for its first long-term capital vehicle.

NYS Common had $178.6 billion of assets as of March 31. Roughly 7.8 percent of its assets were in PE.

Action Item: New York State Common Retirement Fund: www.osc.state.ny.us/pension/