Penn.’s SERS Plugs Reform, Has $205M For Private Equity –

Continuous commitment to private equity and support of corporate reform were on the agenda last week in the Keystone State. The Commonwealth of Pennsylvania State Employees’ Retirement System (SERS) board voted last week to endorse corporate board reform efforts and pledged another $205 million to alternative asset funds.

At the SERS board’s July 13 meeting, it updated its proxy-voting policy to assert that the pension system would support efforts to get corporations to adopt standards that allow shareholders to vote for or against each corporate board director. Most U.S. corporations operate under different, “plurality vote” systems that do not give shareholders the option of voting down candidates.

The board also authorized additional investments, including six private equity investments totaling $205 million:

The SERS board authorized investing up to $50 million in New York-based secondary firm Lexington Partners’ latest fund, Lexington Capital Partners VI. The fund is targeted for between $2 billion and $2.5 billion. The firm hopes to have a final close by the end of 2005. Lexington closed its last secondary fund, Lexington Partners V, in 2003 with $2 billion. The firm expects that fund to be well above 75% invested by the end of this year. The investment in the sixth fund is a follow-on commitment for SERS.

The board agreed to invest up to $50 million in Avenue Special Situations Fund IV, a distressed debt fund managed by New York-based private equity firm Avenue Capital Group. Avenue Special Situations Fund III closed in 2002 with more than $469 million. The investment is a follow-on commitment.

SERS voted to invest up to $35 million in Healthcare Ventures VIII as a follow-on commitment to Princeton, N.J.-based Healthcare Ventures. The venture firm closed its last fund, Healthcare Ventures VII, in 2002 with $353.5 million.

The board agreed to invest up to $35 million in Meritech Capital Partners III as a follow-on commitment. The Palo Alto, Calif.-based Meritech Capital Partners raised its last fund, Meritech Capital Partners II, with almost $740 million in 2000 and raised $1.1 in its inaugural fund in 1999.

SERS will make a follow-on commitment to Alloy Ventures 2005, the latest fund from venture firm Alloy Ventures. The Palo Alto, Calif.-based firm closed its last venture fund, Alloy Ventures 2002, three years ago with $300 million.

The pension system also agreed to invest $10 million to buyout firm Brynwood Partners’ fund Brynwood Partners V. The fund closed last month with $250 million.

SERS manages approximately $26.2 billion and its portfolio includes Apax Partners, New Enterprise Associates, Summit Partners, Blackstone Capital Partners, Morgenthaler Ventures and HarbourVest Partners. The pension system is one of the United States oldest founded in 1923.