Rhode Island Puts Advisory Contracts Up For Review

The Employees’ Retirement System of Rhode Island is preparing to re-evaluate its investment advisors and plans to issue an RFP by year’s end.

“It doesn’t mean our existing consultants are going to lose their jobs,” said Kenneth Goodreau, Rhode Island’s deputy general treasurer for finance. Still, Rhode Island General Treasurer Frank Caprio, who took office in January, wants to take stock of the state’s entire investment portfolio and operations, Goodreau said. Wilshire Associates serves as general consultant and PCG Asset Management serves as the private equity advisor to the $7.3 billion pension fund for state employees, teachers and municipal workers. Both advisors serve in a non-discretionary capacity. The RFPs will be issued as part of Caprio’s overall assessment of the state’s investment landscape. The language of the RFPs is still being tweaked by state officials.

Meantime, the ERSRI late last month made $35 million in commitments to two buyout funds and one venture capital vehicle. The state’s investment commission approved a $15 million commitment to Fenway Partners III LP, a vehicle with a $1 billion target designed to invest in transportation, logistics and consumer goods companies. The pension had earlier backed Fenway Partners II LP, a vintage 1999 fund that to date has yielded a gross IRR of 18.9 percent and a net IRR of 13.0 percent for Rhode Island. The state saw a 1.78 multiple return on its investment in that fund, according to ERSRI statistics.

The state also made a $15 million commitment to Perseus Partners VII LP, a fund with a $1 billion target and earmarked for investments of between $25 million and $100 million in middle-market buyouts.

Rounding out September’s commitments was a $5 million slug to Point Judith Venture Fund II LP, an early-stage venture vehicle with a $75 million target . While ERSRI doesn’t usually invest in increments smaller than $15 million, the investment commission was swayed by Tudor Investment Corp.’s $35 million investment in the fund, as well as a strategic partnership in which the two firms will share deal flow. Like the pension fund, Point Judith Capital is also based in Providence.

Rhode Island’s current private equity allocation target is 7.5 percent. Going forward, the pension fund may look to direct money in funds targeting distressed debt and special situations. Managers who have a sector specialty and don’t rely mainly on leverage to generate returns will also have a leg up in future pitches to Rhode Island, Goodreau said.—J.P.