Pension Manager: Oregon Investment Council
Total Assets Managed: $74 Billion (Aug. 31, 2012)
Private Equity Assets (Main Fund): $14.3 Billion (Sept. 30, 2012)
Private Equity Allocation (Target): 24% (16%) (Sept. 30, 2012)
Chief Investment Officer: John Skjervem
The council’s commitments to Advent International, Pine Brook Partners, Nordic Capital, Alvarez & Marsal and Stonepeak Infrastructure Partners, span a variety of strategies, including business services, international buyouts, energy-related buyouts and infrastructure.
Oregon oversees $14.3 billion in private equity assets in its main, $58.9 billion portfolio, representing 24.2 percent of the total fund as of Sept. 30, 2012. That is well above the pension’s private equity policy target of 16 percent.
Infrastructure got the nod for one of the two $100 million commitments. That was made to Stonepeak Infrastructure Fund LP, a debut fund with a $1 billion target. Stonepeak was spun out of the infrastructure investment division of The Blackstone Group. The fund will invest mainly in energy, transportation and water-related infrastructure.
So far, the fund has done very well on the fundraising trail, last month reaching a first close of $740 million, according to documents from the Securities and Exchange Commission. Included in that was a giant, $400 million anchor pledge from TIAA-CREF, a $250 million commitment from the Washington State Investment Board and a $40 million pledge from the New Mexico Educational Retirement Board. As this is a debut fund, there are no return data.
The other fund that won a $100 million commitment was also a debut effort, the Alvarez & Marsal Capital Partners Fund LP, which has a $500 million target. The firm intends to invest in the business services, consumer retail, industrial and health care sectors, according to a memo from the council.
The firm was formed as a division of Alvarez & Marsal, an international corporate advisory firm. The firm’s private equity arm was formed from the rubble of the Lehman Brothers’ bankruptcy, when Lehman’s head of private equity, Michael Odrich, joined forces with Jack McCarthy, a partner at Alvarez & Marsal who at the time of the bankruptcy was advising the investment bank on repositioning its private equity portfolio.
Oregon also recently invested in Stockholm-based Nordic Capital Fund VIII LP, which received a $75 million commitment from the council. The firm buys companies mainly in Scandinavian and German-speaking countries. The fund has a $4.5 billion target, down from its original goal of $5.5 billion.
The firm has gathered several big commitments from public pension funds, including $400 million from the Washington State Investment Board, $175 million from the Virginia Retirement System, $150 million from the Massachusetts Pension Reserves Investment Management Board and $100 million from the Los Angeles County Employees Retirement Association. This is Oregon’s first investment with Nordic.
June 2012 data from Washington State, which has been an aggressive investor in Nordic, shows that Nordic’s previous fund, Fund VII, has not performed well, delivering a net IRR of negative 3 percent together with a net return multiple of 0.9x. But Oregon may be paying more attention to previous funds, such as the 1998 vintage Fund III and the 2000 vintage Fund IV, which had net IRRs of 31 percent and 33 percent respectively.
Pine Brook also received a $75 million pledge for its latest fund, Pine Brook Capital Partners II LP, a fund with a $2 billion target. The firm, which was co-founded by Howard Newman, a former vice chairman of Warburg Pincus, focuses on the somewhat uncommon combination of two industries, energy and financial services. The fund is also unusual in that it invests in early stage and growth capital companies and continues to invest in them as they grow.
According to March 2012 data from the New York City Employees’ Retirement System, the debut fund, Pine Brook Capital Partners LP, was delivering a net return of 15 percent along with a 1.3x net return ratio. That fund had raised $1.4 billion.
Fund II also has garnered commitments of $75 million from the New Mexico State Investment Council and $50 million from the Kansas Public Employees Retirement System.
Finally, the council joined the crowd in investing $50 million with the latest mega-fund from Advent, Advent International Global Private Equity Partners VII LP, which closed in November with $10.8 billion in commitments, making the fund the largest vehicle raised completely after the start of the financial crisis. The $50 million commitment was lowered from an initial $75 million because the fund was oversubscribed, according to the Oregon memo.
Advent focuses mainly on large buyouts in both Europe and North America. Already, Fund VII bought up the holding company that makes Simmons and Serta mattresses from Ares Management and the Ontario Teachers’ Pension Plan.
The fund had a near clean sweep among public pension funds. Among the fund’s many commitments were $450 million from the California Public Employees’ Retirement System, $400 million from the Washington State Investment Board, $200 million each from the Minnesota Board of Investment and the Massachusetts Pension Reserves Investment Management Board, $150 million from the Illinois Teachers Retirement System, and $100 million each from the Texas Employees’ Retirement System and the Tennessee Consolidated Retirement System.
Oregon is a return investor in Advent, having invested in Fund VI. That fund, to which Oregon invested $100 million has returned a net IRR of 10.3 percent and a return multiple of 1.2x, according to the council’s return data from June 2012.