Oregon’s PE portfolio shows negative cashflow for first time since 2008

Contributions from Oregon Investment Council’s private equity portfolio outweighed distributions by $518 million, the system’s first year of negative cashflow since the global financial crisis.

Even as cash flows have slowed, the system plans to commit between $2.5 billion and $3.5 billion to up to 15 funds this year, according to a presentation that will be made at the system’s January 24 board meeting.

Buyouts reviewed the presentation and board documents ahead of the meeting.

Oregon Investment Council, which manages investments for multiple state pensions and endowments, is one of the nation’s largest allocators to private equity. Oregon Public Employees Retirement System, its biggest plan, has been consistently overallocated to the asset class, with 28 percent of total assets in private equity on a 20 percent target.

Oregon’s negative cashflow shows the severity of the year’s exit market.

US private equity firms exited just over 885 investments with total value of $183 billion through the first three quarters of 2023, according to board documents citing Pitchbook data.

Both the number and total value of exits are lower than every year since at least 2012, according to the presentation.

According to the documents, the percentage of distributions to the portfolio’s NAV stood below 10 percent in the first half of 2023.

From 2014 to 2020, the distribution rate hovered around 25 percent, the presentation said. A huge spike in 2021 brought this figure to 35 percent, before its steep drop.

A return to the more normal rate of 25 percent would generate $6.5 billion of annual distributions, according to the presentation.

According to the presentation, Oregon committed $2.5 billion to private equity through 10 buyout and growth equity commitments in 2023, along with contributions to an ongoing separately managed account and co-investments.

Oregon currently maintains 45 general partner relationships, board documents said.

Oregon looks to commit 20 percent of its pacing to co-investments through an outsourced program with Pathway Capital Management started in 2019.

According to the presentation, Pathway has committed $2 billion to 110 co-investments in its program, which has saved Oregon $208 million in fees and carry savings.

All of the co-investments have come from Oregon’s GP relationships, according to board documents.