Philly Looking At Opportunities In Eastern Europe, Asia

The $5.2 billion City of Philadelphia Board of Pensions and Retirement wants to build a globally diversified portfolio, and has its eye on opportunities in Eastern Europe, including the Czech Republic, Romania and Bulgaria, as well as in Japan, South Korea and Australia.

At the same time, the city plans to steer clear of what it considers to be emerging markets in Asia. After conducting some due diligence, the limited partner determined the risks of doing so outweighed the potential rewards. Specifically, the pension fund checked out a number of managers in those regions but didn’t feel comfortable with any of them, according to Amy Miller, investment officer, speaking at a recent conference.

Philly now has 19 percent of its alternative portfolio in Western Europe; 1 percent is in Latin America, as part of a global fund; and it also has some exposure to Australia and Turkey.

The first foray into Eastern Europe or Asia would probably be through a roughly $20 million commitment to a fund of funds, and would probably not be made any sooner than two years. Franklin Park, the LP’s non-discretionary private markets advisor, is looking now at pan-Asian vehicles.

Past commitments that the city has made overseas include ones to Standard Life of Scotland’s European Strategic Partners I (€25 million) and II (€20 million), a European funds of funds earmarked for international investment opportunities. The LP was the first major investor to sign on to ESP I. The pension plan also committed €15.2 million to Carlyle Europe Partners III, LP. Launched in 2006 at €5.4 billion, the firm uses the fund to do leveraged buyout transactions in Europe.