Oregon, Mass PRIM Both Seek New Advisors

Limited partners: Massachusetts Pension Reserves Investment Management (MassPRIM), Oregon Public Employees Retirement Fund

Proposal requests: seeking new alternative asset advisors

Assets under management: MassPRIM: $27 billion; Oregon: $55.3 billion

Committed alternative asset capital under management: MassPRIM: $6.9 billion; Oregon: $15.2 billion

Both the Oregon Public Employees Retirement Fund (OPERF) and the Massachusetts Pension Reserves Investment Management (MassPRIM) Board have issued requests for proposals (RFPs) that could lead to the selection of new advisors to their alternative investment programs. Expect them to select new advisors as soon as early December.

Oregon PERF appears to have finally lost faith in Pacific Corporate Group (PCG), which has advised the pension fund on private equity investments for more than 14 years. The pension system will search for a new advisor, but PCG is welcome to submit a bid. “By virtue of the departures at PCG we felt it was necessary to go out and issue an RFP,” Jay Fewel, a senior equity investment officer, told Buyouts. Pacific Corporate Group has seen a number of senior executives leave over the years, including Managing Director Tara Blackburn, which was the director that worked most closely with Oregon. Three directors who left at the same time handled some of PCG’s largest pension investors, such as the California Public Employees’ Retirement System (CalPERS) and the New York State Common Retirement Fund.

Oregon PERF requires candidates to have provided consulting services to investors with private equity assets of at least $1 billion in aggregate, to have a minimum of three years experience providing such consulting services to public or private pension plans or comparable experience, and to be able to commit a minimum of 20% of their firm’s available time to OPERF.

The Oregon PEFR portfolio includes buyout funds, venture capital funds and special situation funds. The pension fund has a target allocation of 12% for alternative assets. As of the end of this June, Oregon PERF has more than 139 funds in its LP portfolio, including 125 active ones, totaling more than $14 billion in committed capital.

Meantime, MassPRIM expects to choose a new discretionary advisor by Jan. 1, 2007. MassPRIM’s requirements are similar to Oregon’s. The pension system requires candidates to have had responsibility for alternative asset investment consulting for public or private investors with aggregate portfolios of at least $1 billion in commitments; to have provided consulting services to at least five public or private funds, including at least one public pension fund; and to have at least three years experience as a lead investor overseeing investments in venture, buyout and distressed debt.

MassPRIM says it expects to enter into a three year consulting agreement with the winning firm. It scheduled tentative site visits and investment committee interviews for last week, and plans to take up the matter at its Dec. 5 board meeting. Pathway Capital is MassPRIM’s current alternative investment consultant. Pathway is moving away from the discretionary investment management that MassPRIM is seeking, and has informed the pension fund that it will not be seeking a renewal of its contract when it expires at the end of the year.

MassPRIM invests in buyouts, venture capital and special situation funds. It has a target allocation of 10% for alternative investments, not including real estate, but its actual allocation as of the end of July in alternatives was 6.4 percent. As of the end of June, MassPRIM had committed more than $6.85 billion to 212 limited partnerships.

These latest moves come after the two large California pensions, the California State Teachers’ Retirement System (CalSTRS) and CalPERS, announced searches for investment managers to overhaul their alternative asset investment portfolios (see Buyouts, Apr. 17, 2006).—M.S.