Rhode Island deepens relationship with Nautic Partners

  • AUM: $8.4 bln
  • PE allocation: 6 pct; PE target allocation: 11 pct
  • PE strategy: largely focused on buyouts
  • Whom to contact: Evan England (evan.england@treasury.ri.gov)
  • Why this is important: The LP has committed $130 million across five Nautic funds

Rhode Island State Investment Commission at its Dec. 12 meeting re-upped $50 million to Nautic Partners’ ninth fund, targeting $1.25 billion.

The re-up is substantially larger than its commitments to previous Nautic funds. The commission committed $20 million to each of Nautic’s fifth, sixth, seventh and eighth funds.

“That’s the amount we have been commiting (for the most part) to meet our allocation and diversification goals,” said Evan England, spokesman for Rhode Island Treasurer Seth Magaziner.

The $8.4 billion state pension system has 6 percent of its assets in PE, a little more than half its 11 percent target allocation.

The pension system planned to commit $20 million to $60 million across five to 10 funds per year through 2022, which would help bring the PE portfolio in line with its asset-allocation target, Buyouts reported in 2017.

Nautic invests $25 million to $100 million in North American middle-market healthcare, industrial products and outsourced services companies with Ebitda of between $5 million and $50 million.

Several LPs, including Arizona State Retirement System, Brown University and New York State Teachers’ Retirement System, committed to Nautic’s eighth fund, which closed at $900 million in 2016, Buyouts reported.

The GP commitment would be at least $50 million in the latest fund. Management fee for Fund IX was 2 percent.

Any transaction fees would be offset against management fees. The terms also included a GP clawback, a company presentation to Rhode Island SIC said.

So far Nautic has made 134 investments across its various funds, which produced a net internal rate of return of 17.9 percent as of Sept. 30, 2018, the presentation said.

Recent investments include Mikart, RevJet and Healthy Eyes Advantage.

Nautic acquired Endries International, an original equipment manufacturer, in May 2017 and sold it in December to MSD Partners, the investment advisory formed by principals of MSD Capital, Michael Dell’s family office.

Rhode Island’s $2.4 billion PE portfolio included buyouts (60 percent) and venture capital, distressed debt, energy, fund-of-funds, opportunistic credit and secondaries, a pension system presentation said.

The state had 140 PE investments, of which 84 were in buyouts, 23 in venture and 14 in distressed debt as of June 30, 2018.

The buyouts produced an IRR of 13.33 percent as of June 30, 2018, the presentation said.

Rhode Island’s PE portfolio returned 17.22 percent for the 12 months ended Nov. 30, 2018. It returned 15.06 percent in 2017, 12.03 percent in 2016 and 10.63 percent in 2015.

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