San Francisco backs Blackstone Energy, HealthCare Royalty funds

  • Pension backs Blackstone Energy Partners II
  • Blackstone targeting $4 bln for energy buyouts
  • HealthCare Royalty to invest in royalty streams

The San Francisco Employees’ Retirement System approved a $50 million commitment to The Blackstone Group’s latest energy fund and up to $25 million for HealthCare Royalty Partners III at its Sept. 10 meeting, Norm Nickens, the commission secretary, told Buyouts in an email.

Blackstone is targeting $4 billion for Blackstone Energy Partners II. The fund will make control-oriented growth investments and buyouts in the energy and natural resources sectors, according to retirement system documents.

The fund is a follow-up to Blackstone’s first dedicated energy fund, Energy Partners I, which closed on $2.5 billion in 2012. Blackstone had used the fund to invest $1.5 billion across eight investments as of June 30, according to San Francisco documents. The fund was generating a 1.6x multiple and a 52 percent net internal rate of return as of the same date, according to performance figures provided by San Francisco.

San Francisco is a longtime investor in Blackstone funds, having committed $144 million across five of the firm’s Blackstone Capital Partners funds. This is the retirement system’s first commitment to Blackstone’s dedicated energy funds.

The retirement system also approved a commitment of up to $25 million to HealthCare Royalty Partners’s third fund. The firm is targeting $850 million with a $1.25 billion hard cap for Fund III, which will be used to purchase royalty streams generated by the sale of healthcare products. HealthCare Royalty Partners had raised $1 billion for the fund as of Aug. 4, according to a Form D filed with the United States Securities and Exchange Commission.

HealthCare Royalty Partners is led by former Paul Capital partners Gregory Brown, Todd Davis and Clarke Futch. The Stamford, Connecticut-based firm was founded in 2007 and manages more than $3 billion of capital, according to its website.

San Francisco Employees’ Retirement System’s investment portfolio was valued at $16.9 billion as of June 30, 2013, according to the retirement system’s most recent annual report. The retirement system had a 12.2 percent allocation to buyout, venture capital and special situations strategies as of the same date.