Penn. SERS backs LBOs

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

In all, the pension fund made nearly $385 million in commitments, of which $259 million went to LBO funds, including a real estate-focused fund managed by The Blackstone Group. The latest round of commitments to alternatives includes:

• up to $130 million to Apax Europe VII, a follow on investment managed by Apax Partners Worldwide;

• up to $30 million to The Baring Vostok Private Equity Fund IV, managed by Baring Vostok Capital Partners;

• up to $50 million to CVI Global Value Fund, managed by CarVal Investors (see story, page 4);

• up to $25 million to Bain Capital Asia Fund;

• up to $50 million to Sankaty Credit Opportunities III, another Bain Capital fund that uses credit analysis to make investments in distressed debt, mezzanine investments, and other special situations;

• up to $25 million to the inaugural fund managed by Weathergage Venture Capital, based in San Francisco;

• and up to $75 million to Blackstone Real Estate Partners VI.

Created in 1923, Penn. SERS is one of the LBO industry’s most veteran contributors. As of the second quarter last year, it had commitments to 158 buyout funds and a total invested of $2.9 billion, compared to $1 billion in 97 venture capital funds. The pension fund’s target allocation to alternatives is 12%, though it was at 13.5% in September.

The Penn. SERS’s board meets eight times a year and it is rare that it doesn’t approve some level of new commitments to private equity, says Robert Gentzel, Penn. SERS’s director of communications. The latest round was “a little busier than usual,” he says, because the pension fund is looking for more geographic diversification. As an example, Gentzel singles out Moscow-based Baring Vostok, which gives Penn. SERS an entree into Russian markets. That fund invests in mid-market companies in Russia, Kazakhstan, Ukraine, the Baltic countries and Mongolia.