Pennsylvania pension meeting gets heated over private equity diversity questions

The Pennsylvania State Employees’ Retirement System investment committee approved a $125 million commitment to Sentinel Capital Partners despite accusations the firm misled the pension on its diversity efforts.

Diversity has become a flashpoint for board members of many LPs, who believe they can steer managers into paying more than lip service to the topic.

The investment committee voted to approve a $100 million commitment to Sentinel Capital Partners VIII and $25 million to Sentinel Junior Capital II by a 7-3 margin at its meeting held on June 3. It’s not clear how much those funds are targeting.

The vote came after accusations made by Dan Ocko, who attended the meeting on behalf of investment committee member State Representative Dan Frankel. Buyouts watched a video webcast of the meeting.

Ocko said at the meeting that Sentinel Capital falsely stated it had a mentorship program for women and minorities during correspondence with the investment committee

That prompted the committee to press Sentinel Capital to resubmit its answer, Ocko said. He said the firm, in a response provided one day before the investment committee meeting, admitted it did not have a mentorship program for women and minorities.

“I have concerns about trust issues. We submitted questions. They gave us answers that are not true,” Ocko said at the meeting.

Pennsylvania State Treasurer Stacy Garrity said at the meeting that Sentinel Capital had no Hispanic or African-American employees and that only two of its 11 junior employees were female. Garrity voted in favor of approving the commitments.

Alice Mann, a partner at Sentinel Capital who focuses on human capital, who also attended the meeting, said the firm was “on a journey” in its commitment to hiring a diverse investing team and overall firm.

Mann, who started her position at the end of January, said she was not involved in preparing the original answer.

Sentinel Capital founder and managing partner David Lobel also said he did not review the original answer as the task was delegated to the firm’s legal and administrative staff.

Sentinel Capital did not respond to questions seeking further comment.

Ocko also said at the meeting that the funds would charge a 25 percent carried interest rate, which is generally above the market rate of 20 percent.

In its presentation, Sentinel Capital said it focuses on lower-mid-market businesses and described itself as a leader in consumer goods, business services, healthcare services and industrials.

Update: This report was updated to clarify that Buyouts watched a video webcast of the meeting.