Firms & Funds

San Diego pension doubles commitment to KKR spinout

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A passenger jet flies past a grove of palm trees as it departs San Diego on Dec. 13, 2010. REUTERS/Mike Blake
  • Assets under management: $12.4 billion
  • Target allocation to PE/VC: 8 per cent
  • Actual allocation to PE/VC: 7.1 per cent
  • PE/VC strategy: Roughly a third of the pension’s private assets are in private equity (32 per cent), while the balance is made up by real estate (38.7 per cent) and private real assets (29.3 per cent).
  • Key advisors/consultants: Aon
  • Who to contact for a meeting: Steve Sexauer (memberservicecenter@sdcera.org); or Mary Montgomery (mmontgomery@sdcera.org)
  • Why this is important: Public Pension Capital’s evergreen fund gets a vote of confidence from institutional investors

San Diego County Employees’ Retirement Association has doubled, to $100 million, its commitment to an evergreen fund run by two former partners of Kohlberg Kravis Roberts & Co.

At a board meeting last week, CIO Stephen Sexauer said the board had approved doubling down on an October 2016 commitment of $50 million to Public Pension Capital LLC.

The reason for San Diego’s vote of confidence remains unclear. Sexauer was unavailable for comment. However, the fund appears to be off to a strong start.

Since the pension’s initial investment, Public Pension Capital has drawn down just over 20 percent of the commitment. This has produced a healthy IRR of 19.2 percent, according to the Q1 2018 Quarterly Investment Review.

The increased commitment of $50 million also marks the first follow-on investment for the pension since Blackstone Capital Partners VII LP, in 2016, as the pension nears its target allocation.

Before this announcement the $12.4 billion fund held $881 million, or 7.1 percent, of its portfolio in private equity, which is close to its target of $993 million, or 8 percent.

Public Pension Capital was founded in 2012 by former KKR partners, Perry Golkin and Mike Tokarz. It describes itself as a middle-market private equity fund that invests in business and industrial services, financial services, healthcare, and special chemicals. Its main sources of capital are state pension funds and other long-term investors.

As of April 2018 the fund had raised $786 million.