Oregon commits $200M to LS Power III, Rockpoint funds ahead of Jay Fewel retirement

As part of its target allocation of 20 percent to 30 percent of its alternatives portfolio for infrastructure, the state pension system will invest in LS Power Group’s third private equity fund, which has a target of $1.5 billion, according to supporting documents for the investment council’s Dec. 4 meeting.

LS Power’s vintage 2005 fund raised $1.2 billion with a focus on acquiring power and energy infrastructure assets. It was followed by the vintage 2006 Fund II, which raised $3.1 billion to pursue corporate and strategic minority investments, operating power generation assets, and select development opportunities.

LS Power Equity Partners III will focus exclusively on operating assets and “generally not pursue” the types of development and strategic opportunities in the first two funds, according to a memo to the board by private equity advisor, Torrey Cove Capital Partners. 

“LS Power will mainly avoid ‘dirty’ coal power generation…and focus instead on natural gas, renewable and ‘clean’ coal,” the memo said. ”LS Power’s expertise in navigating the various regulatory regimes that govern the industry gives it a competitive advantage.”

Meanwhile, the Rockpoint Core Plus Real Estate Fund, which has a target of $1 billion, projects a 9 percent to 10 percent net IRR for investors. The fund offers a lower-risk, longer-term hold strategy for U.S. real estate investments as a complementary fund to Rockpoint’s existing opportunistic fund series.

Rockpoint traces its roots to 2003 after Bill Walton, Keith Gelb and 11 other senior member left Westbrook Partners, to launch a real estate opportunity fund platform. Oregon has participated in each Rockpoint fund offering since its formation ten years ago. The pension fund also invested in the Westbrook I-IV fund series.

The commitments by Oregon came the same week Fewel, 58, announced his retirement after a 24-year career at the Oregon State Treasury. 

”During his tenure, the Oregon native and senior investment officer was responsible for overseeing the state’s broad equity portfolio and for guiding Oregon’s advance into a category of investments known as private equity,” according to a statement from Oregon. 

The alternative investments selected for Oregon’s portfolio posted an average annual return of 15.7 percent since the early 1980s, and ”contribute significantly to the state’s top-tier status among peer funds,” the state said.

Prior to its commitments to LS Power and Rockpoint, Oregon pledged $50 million to Appian Natural Resources Fund, $100 million to MHR Institutional Fund IV and up to $50 million to OrbiMed Private Investment Fund V, according to September and October meeting minutes. The firm also OK’d a current commitment extension to Pine Brook II.