The Oregon State Treasury has negotiated lower fees and better terms with six private equity firms and is in talks with two other general partners to do the same.
One of the firms that agreed to lower its fees is The Blackstone Group. Oregon made a $200 million commitment to Blackstone Capital Partners VI LP recently, in return for fee concessions, confirmed spokesman James Sinks. The limited partner had not previously pledged to a Blackstone Group private equity fund, although it did commit $200 million in 2007 to Blackstone Real Estate Partners VI LP.
The Treasury would not name the other firms that agreed to lower fees but said in a prepared statement, “One firm agreed to cut management fees by 20 percent. Another is capping its management costs at a level reduced by 25 percent.”
Oregon has been pledging to private equity since 1981. Over the past 10 years, the state has committed in a big way to the following: mega-firms Kohlberg Kravis Roberts & Co. ($3.60 billion) and TPG ($1.75 billion); a program called Northwest Emerging Ventures run by Grove Street Advisors for investing in smaller funds ($950 million); European buyout shop CVC Capital Partners ($785 million); and energy specialist First Reserve Corp. ($775 million). Other firms that have gotten multiple commitments from the state in the past 10 years include Apollo Management, Oak Hill Partners, Oaktree Capital Management, Providence Equity Partners and Warburg Pincus.
Private equity has been Oregon’s best performing asset class over the past three decades, returning an average of 16 percent a year, as of March 31, with a total value multiple of 1.4x.
So far this year the limited partner has pledged at least $1.6 billion to 13 private equity firms, even though the actual allocation to private equity now stands at 22 percent, above its 16 percent target and above the high end of its range of 12 percent to 20 percent.
The Treasury and its Oregon Investment Council, which manage $68 billion in assets, invest for the Oregon Public Employees Retirement Fund, Common School Fund and State Accident Insurance Fund.