- Parties could not agree on contractual terms
- More oversubscribed funds pushing for GP-friendly terms
- Centerbridge expected to hold final close in October
“We could not agree on contractual terms so we are not moving forward with the investment in Centerbridge III,” PennSERS spokeswoman Evelyn Williams told Buyouts in an email.The $52 billion retirement system declined to provide details on the source of the disagreement.
PennSERS requested a seat on the fund’s advisory committee and needed to finalize its commitment roughly a month before the fund’s final close, which was scheduled for late October, according to a source familiar with the situation. Centerbridge typically assembles its advisory committees in the final stages of fundraising.
Centerbridge is targeting $5.75 billion with a $6 billion hard cap, according to Pennsylvania documents. The fund is expected to be oversubscribed.
Some general partners are using strong demand for their funds as an excuse to ask LPs to accept more GP-friendly fund terms, several LPs have said to Buyouts.
In October, Oregon State Treasury Chief Investment Officer John Skjervem said that Oregon pulled two previously approved commitments this year after failing to agree on fund terms with its private equity managers.
“In every case it was a re-up with an existing manager,” Skjervem said. “They were oversubscribed and decided to change the terms and conditions. So, we have to at some point philosophically say, ‘We were a founder and we’re losing our founders’ fees. Or we feel strongly that director fees should be offset.’ You have to draw a line in the sand, stand up for what you believe in, and walk away.”
The Teachers’ Retirement System of Louisiana walked away from an approved $75 million commitment to Vista Equity Partners’ fifth fund after negotiations with the firm, Maurice Coleman, Louisiana’s director of private markets, told Buyouts in September.
Kentucky Retirement Systems considered taking a similar stance with Vista. Interim Chief Investment Officer David Peden told Buyouts in September that he was unsure whether the retirement system would actually invest the $50 million it approved for the fund, as strong demand from other investors might force Kentucky to reduce its commitment to a size that would not be appropriate for its long-term investment strategy.
It is not clear if Kentucky invested in the fund, which held a final close on $5.8 billion on Oct. 22. Peden could not be reached for comment as of press time.