PaSERS Hits PE Target Allocation, Hires Office Help

The Pennsylvania State Employees’ Retirement System had a busy September, committing some $231 million to seven private equity funds and hiring Credit Suisse Securities Customized Fund Group to help manage its investment office.

The commonwealth also has reached its target allocation to private equity, which is to have 14 percent of the $34 billion pension fund invested in the asset class. At the moment a little more than 10 percent is invested in buyouts, with 3.6 percent in venture capital, according to Robert Gentzel, a pension spokesman. The state’s investment office is just beginning to discuss next year’s investment plan, to be finalized in December. It is too early to say if the state will change its allocation or how having reached it will affect the state’s investment pace, Gentzel said

The latest round of commitments includes up to $10 million to Avenue Special Situations Fund V LP, a $6 billion distressed debt fund; up to $100 million spread across the $10 billion Bain Capital Fund X LP and the $5 billion Bain Capital X Co-investment Fund X LP; $20 million to Segulah IV LP, a European buyout fund; and up to $25 million to TPG Asia V LP, a $5 billion buyout fund aimed at investing in Asian companies.

The latest round of commitments reflects the state’s continuing appetite for international earlier, having committed €100 million to Apax Europe VII LP; up to $30 million in Baring Vostok Private Equity Fund IV LP, which invests in Russia and neighboring countries; and up to $25 million in Bain Capital Asia Fund LP.

This last round also saw PaSERS give the green light for investments in two venture capital firms: up to $25 million to Ignition Venture Partners IV LP, and up to $1.2 million for a secondary interest in Meritech Capital Partners II LP. The pension also committed up to $50 million to Starwood Global Opportunity Fund VIII LP, a real estate fund. The state had already committed to some of these funds, including a prior commitment of $60 million to the Avenue Capital Group’s fund and $24.6 million to Meritech Capital Partners vehicle.

PaSERS meets eight times a year and has been a longtime investor in LBO funds. Pennsylvania is currently invested with 137 general partners across a total of 318 private equity funds, not counting the most recent commitments.

Managing the reams of paperwork for the Keystone State’s alternative asset portfolio has become all-consuming for the office staff in Harrisburg, so PaSERS hired Credit Suisse Securities Customized Fund Group to help out. “There’s a lot of work attendant in maintaining all of those funds, both in the partner role of attending advisory committee meetings or annual meetings, or being involved in conference calls or whatever may come along,” Gentzel said.

Credit Suisse will provide mainly administrative support so PaSERS staffers can spend more time assessing new GPs and their funds. It will not serve as an investment advisor; Cambridge Associates fulfills that role.—J.P.