PaSERS, Past Target Allocation, Backs Foreign Funds

A long time supporter of LBO funds, Pennsylvania State Employees Retirement System (PaSERS) has selected an international group of funds to which it will commit its latest round of capital, including Bain Capital’s debut Asia fund.

This round of commitments to alternatives were: up to €100 million to Apax Europe VII, a follow on investment; up to $30 million to The Baring Vostok Private Equity Fund IV, which invests in Russia and neighboring countries; up to $50 million to CVI Global Value Fund; up to $25 million to Bain Capital Asia Fund; up to $50 million to Sankaty Credit Opportunities III, which uses credit analysis to make investments in distressed debt, mezzanine investments, and other special situations; up to $25 million to Weathergage Venture Capital; and one real estate investment, up to $75 million to Blackstone Real Estate Partners VI.

PaSERS’s board meets eight times a year and it is rare that it doesn’t approve some level of new commitments to private equity, said PaSERS’s director of communications, Robert Gentzel. The latest round was “a little busier than usual,” he added, with $384.8 million in commitments. A full $259 million of it went to LBO funds, including the Blackstone real estate fund.

Created in 1923, PaSERS is one of the LBO industry’s most veteran contributors. As of the second quarter it had $2.9 billion of its $29.8 billion in total funds invested in buyouts, with another $1.0 billion invested in venture capital. Its target allocation to alternatives is 12%, though it was at 13.5% in September, which for the moment puts it past its target allocation. As of the end of the second quarter PaSERS listed commitments to 158 buyout funds and 97 venture funds.

A scan of the funds shows a diversity in both geography and strategy. The funds selected represent in particular a desire for geographic diversification, said Gentzel. He singled out The Baring Vostok fund as the best example, which gives PaSERS an entree into Russian markets. That fund invests in mid-market companies in Russia, Kazakhstan, Ukraine as well in the Baltic countries and Mongolia.

The pension invested in the three previous Apax Europe funds; it has invested with three of Bain’s general funds; and it has invested in all of Blackstone’s general funds except its first. As for results: the three Apax funds have returned $52.1 million on the $102.3 million drawn down and the $155 million PaSERS committed; the two Bain funds for which PaSERS lists results on its Web site have returned $12.2 million on the $102.3 million drawn down and the $155 million committed; the Blackstone funds have returned $197.2 million on the $164.2 million drawn down and the $340 million committed.