Pennsylvania SERS bets on China with Primavera

  • Primavera Capital invests in Chinese buyouts, growth equity
  • Pennsylvania targets more international funds
  • Alternatives portfolio returned 13.1 pct last year

The Pennsylvania State Employees’ Retirement System continued its push for more exposure to international alternative funds with a $50 million commitment to Chinese private equity firm Primavera Capital Group, according to a press release.

Pennsylvania’s 2014-2015 investment plan calls for a greater exposure to geographically diverse funds. That initiative also motivated the $27 billion retirement system’s $50 million commitment to a South Korea middle market private equity fund, Hahn & Company II, in October.

Primavera Capital Fund II will invest in growth equity and control investments in China, according to the system.

In addition to traditional buyouts and growth equity, Primavera can also invest in restructuring, distressed and turnarounds, according to its website. The firm is led by Fred Hu, a former Goldman Sachs Group partner who chaired the firm’s efforts in China.

It is unclear how much Primavera plans to raise for Fund II. The firm, with offices in Hong Kong and Beijing, could not be reached for comment.

Pennsylvania had a 20 percent allocation to alternative investment funds as of Sept. 30, according to a quarterly investment report. Alternative investments, which include the retirement system’s commitments to private equity, special situations and venture capital funds, returned 13.1 percent for the retirement system last year.

The retirement system returned 6.4 percent overall in 2014, according to the press release.

“The alternative investments portfolio led returns for the year,” said Chief Investment Officer Tom Brier in the release. “The last half of 2014 was difficult for any U.S. investor in foreign markets. That said, we are seeing positive results from the global equity portfolio during the first two months of 2015.”