The Oregon Investment Council has slashed its 2009 private equity investment budget by $1 billion due to “changes in the market,” which have “forced” the limited partner to trim back its investment limit to $2.5 billion from a prior level of $3.5 billion, according to board documents.
“For 2009, it looks like most, if not all, commitments will be made to existing relationships,” Jay Fewel, the state’s senior investment officer, told Buyouts.
Oregon has also decided to cut back on a $3 billion commitment made in June 2008 to a strategic credit opportunity mandate run by KKR Asset Management, the fixed-income investment platform of Kohlberg Kravis Roberts & Co., due to concerns raised by personnel changes at the firm in December, as well as the possibility that KKR could end up managing more than 10 percent of the Oregon Public Employees Retirement Fund’s assets. Liquidity issues and the need for cash were also listed as reasons for the cutback. In lieu of funding the final $1 billion installment of the pledge to KKR, the state instead committed that money to an unlevered senior bank loan and high-yield portfolio managed by Oak Hill Advisors.
As of March 31, 2008, the state had an actual private equity allocation of 23 percent, a target allocation of 16 percent, and a range of 12 percent to 20 percent. The Oregon Investment Council manages $56 billion for the Oregon Public Employees Retirement Fund, the State Accident Insurance Fund, the Oregon Short Term Fund and other smaller funds.
Correction: The original version of this article incorrectly stated that the Oregon Investment Council had made a $500 million commitment to Fisher Lynch Co-Investment Partnership II LP in May. In fact, the LP has not yet acted on this recommendation from its staff. The pledge continues to be under consideration, but it was pulled from the LP’s May agenda.
The third paragraph of this article orginally read as follows: Among its recent investments, the $56 billion pension made a $500 million commitment to Fisher Lynch Co-Investment Partnership II LP in May, doubling the pledge it made to Fisher Lynch Capital‘s first co-investment vehicle three years ago. The new pledge supplies half the capital for a joint-venture partnership established with the Washington State Investment Board. To decrease the drag on the portfolio caused by management fees, the commitment will be made over a two-year period, with $300 million coming from the 2009 private equity allocation and the remainder from the 2010 allocation, according to Oregon’s board documents. The pledge will not accrue management fees or be callable until 2010. Fisher Lynch Capital’s first co-investment fund closed in 2006 with $500 million.