PA SERS commits $100 mln to new TSG relationship

  • AUM: $28.8 bln
  • PE target: 16 pct
  • Actual PE commitment: $3.9 bln, or 13.7 pct
  • Key personnel: Bryan Lewis, CIO; David Felix, director alternative investments
  • Why this is important: The LP is continuing to build new relationships.

Pennsylvania State Employees’ Retirement System’s board at its Oct. 23 meeting moved to commit up to $100 million to TSG Consumer Partners’ eighth fund.

This is a new relationship for the pension system, part of its strategy of making fewer and larger commitments to best-in-class funds, according to PA SERS’s 2018-19 investment plan.

How much TSG8 is targeting is unclear. The TSG7 A and TSG7 B funds closed in December 2015 at $2.5 billion in combined commitments. TSG6 closed at $1.3 billion in 2011.

San Francisco-based TSG invests in middle-market consumer-products companies. Most recently, it acquired a minority stake in Dutch Bros Coffee, a drive-thru coffee company.

Other portfolio companies include Beauty Brands, Duckhorn VineyardsHuda BeautyPrive Revaux and Sunshine Fitness Growth Holdings.

The strategy for the latest fund is unclear. TSG made strategic shifts in its last two fundraises, according to its Form ADV.

Minimum investments increased to $50 million in the TSG6 and TSG7 A funds, compared with $10 million for earlier funds. (Its minimum investment remained at $10 million for TSG7 B.)

In the two TSG7 funds, the 2 percent management fee was payable quarterly in advance. For previous funds the management fee was payable semiannually in advance.

For the two TSG7 funds, carried interest was 20 percent and would increase to 25 percent if the fund reached a 2x MOIC and produced an internal rate of return of 15 percent, New Jersey State Investment Council documents said.

More significantly, with its two TSG7 funds, TSG expanded its universe of potential investments to companies with annual revenue ranging from $10 million to $500 million. In its earlier funds it invested in companies with annual revenue between $30 million and $300 million.

Specifically, TSG7 A could invest $50 million or more in companies with revenue between $50 million and $500 million, while TSG7 B could invest less than $50 million in companies with annual revenue of $10 million to $200 million.

TSG also agreed to allow a strategic co-investor to co-invest alongside investments made by TSG 7 A and TSG 7 B, and would allow additional individuals to join later, the Form ADV said.

The identity of the strategic co-investor is unclear.

The private equity firm declined comment.

In December 2016 Wafra Investment Advisory Group funds acquired a minority ownership interest of less than 15 percent in TSG and funds TSG6, TSG7 A and TSG7 B.

TSG had $4.86 billion of assets under management as of Dec. 31, 2017, the Form ADV said.

TSG6 produced an IRR of 40 percent as of Sept. 30, 2016, a GCM Grosvenor report said.

Arizona Public Safety Personnel Retirement System committed a total of $50 million to the TSG7 A and TSG 7 B funds in 2015. New Jersey State Investment Council committed a total of $125 million to the two TSG 7 funds in 2015.

Action Items: Read TSG’s Form ADV here: TSG Founder and CEO Chuck Esserman can be reached at or +1 415 217-2340.

Correction: A photo caption accompanying this story incorrectly described the relationship of TSG and Planet Fitness. Sunshine Fitness is a franchisee of Planet Fitness clubs. TSG exited Planet Fitness about a year ago.