SC Wants To Invest In Local Businesses

The South Carolina Retirement System Investment Commission has issued an RFP for a private equity co-investment program manager to help the state invest directly in businesses either headquartered in the state or that have a significant presence there.

The size of the mandate, expected to be at least $50 million, will ultimately depend on the opportunities that the state and the chosen manager identify, Hilary Wiek, director of public and private equities, told Buyouts.

Applicants should have many deep private equity fund relationships, have experience with the due diligence of direct co-investments alongside private equity sponsors, and have the capacity to devote sufficient time and attention to creating and properly reviewing deal flow.

The program is expected to be open to venture capital, growth equity, buyout or other “worthy” opportunities, according to the RFP. The limited partner intends to help identify deal flow and will share discretion over the approval of all investments in the program with the manager.

The RFP states, “although politically sourced deals will be allowed, no preference will be given to such investments.” Wiek explained to Buyouts, “‘Politically sourced deals’ was meant to nod toward the fact that various politicians and their relatives (as one example) may attempt to pull strings to get investment for their businesses. If it is a good investment idea, it may get done. But it will not get done because of who they are.”

Interested firms must submit a notice of intent by Dec. 4; the deadline for questions is Dec. 11. Proposals are due Jan. 22, 2010, but the timeframe for interviews has not yet been decided.

The $23 billion South Carolina Retirement System Investment Commission raised its target allocation to private equity to 7 percent from 6 percent in April; as of June 30, the actual allocation to the asset class stood at 2.5 percent.

Recent commitments include those to Azalea Capital’s Azalea Fund III (up to 20 percent of the fund), which is earmarked for investing in mid-market firms in the Southeast; secondary fund Lexington Capital Partners VII ($100 million); buyout shop Aquiline Capital Partners’s Aquiline Financial Services Fund II ($50 million); and venture capital funds-of-funds manager TrueBridge Capital Partners’s CVE-Kauffman Fellows Endowment Fund II ($40 to $50 million, depending on their fundraising success).

South Carolina entered the private equity asset class in late 2006 and will likely take about four more years to reach its target. The program commits directly to funds and also invests in funds of funds that provide geographic diversification and exposure to a wide variety of strategies.