The Oregon Investment Council, which manages $75 billion in pension assets, is well on its way to fulfilling its promise of $2 billion in private equity commitments in 2011. The council committed to a trio of funds, for a combined pledge worth $275 million, at its most recent board meeting on July 27.
The council contributed $75 million to TPG Capital‘s TPG Growth II LP, the successor fund to TPG’s STAR, to which Oregon committed $100 million in 2007. Both funds target smaller, high-growth companies. An OIC summary of Fund II said that the fund, “with the deep resources of a large, global asset management firm such as TPG, would have a competitive advantage over small, stand-alone firms targeting similar transaction sizes.” The fund has a target of $2 billion and will split its portfolio investments equally between North American and East Asia.
While relatively early in the investment cycle, TPG STAR has generated a net IRR of 10.6 percent through Dec. 31, 2010, for a net total value multiple of 1.16, according to the OIC. The IRR number puts it into the top quartile of funds, according to the summary, citing data from Venture Economics.
Oregon’s second fund commitment was $100 million to Highstar Capital‘s Highstar Capital IV LP, which has a $2 billion target. Highstar focuses on infrastructure assets such as ports, energy transmission, airports and water-related services. The firm has invested more than $4.8 billion in a variety of infrastructure projects, mostly in North America and Europe. Oregon said it was attracted to the fund because “infrastructure assets tend to exhibit lower volatility relative to other asset classes and returns that are less correlated to capital market assets such as equities and fixed-income instruments.” The fund is Oregon’s first investment in infrastructure.
Oregon says Highstar’s first three funds have delivered net IRRs of 16 percent. The pledge offers Oregon the option of co-investing alongside Highstar at a reduced fee. On its previous three funds, Highstar was a partner with AIG.
Finally, Oregon committed $100 million to Natural Gas Partners‘s NPG Natural Resources X, a fund whose firm has generated a 22 percent net IRR over all its funds dating back to 1988. NPG is targeting $4 billion for its 10th fund, which will invest mainly in oil and natural gas production and oilfield service industries. Most of the fund’s investments are likely to be in North America. A summary prepared for the OIC said that the world’s increasing population growth and urbanization will contribute to changing energy consumption patterns for energy, challenges that the fund’s portfolio companies will help to solve.