PA SERS shrinks big fund commitments

The $35 billion Pennsylvania State Employees’ Retirement System made several large commitments earlier this month that were noticeably smaller than what the limited partner has doled out in recent years. That marks a continuing trend for Pennsylvania’s second largest pension fund.

The trend isn’t surprising, considering that as of last September, 15% of the state pension fund’s investments were in private equity, which is 1% above its target allocation to the sector.

“As our existing funds are maturing and paying out, we are investing to maintain our allocation level and our relationships with good managers,” says Pamela Hile, a spokeswoman for PA SERS. “It’s simply a matter of how much money we have available to invest within that asset class.”

The state pension fund committed $40 million to Sankaty Credit Opportunities IV, a fund earmarked for mezzanine and high-yield debt opportunities, managed by Boston-based Sankaty Advisors, a Bain Capital affiliate; $50 million to megafund TPG Partners VI; and $15 million to the early stage venture capital fund Lightspeed Venture Partners VIII.

PA SERS has previously committed to all three firms. But while all three are seeking to amass funds larger than their predecessors, the limited partner scaled back its commitments to each when compared to the last time each firm came to market to raise a fund.

The pension fund committed $18 million to the seventh fund of Lightspeed Venture Partners, which closed its previous vehicle in 2005 with $500 million in commitments. This time, the venture capital firm is looking to raise $675 million.

Similarly, PA SERS committed $100 million to TPG Partners V, which closed with $14 billion in 2006. TPG is targeting $20 billion for its newest fund.

And the LP committed $50 million to Sankaty Credit Opportunities III, a $2.2 billion vehicle. Sankaty Advisors is seeking to double the size of its predecessor fund.

In a similar move last month, the pension committed $50 million to Madison Dearborn Partners IV, which was one-third less than what it committed to the Chicago firm’s last fund. —Constance Loizos