Tennessee backs Quantum, Olympus with new commitments

Tennessee Consolidated Retirement System is moving forward with a pair of commitments to private equity funds, spokeswoman Gillian Johnson told Buyouts in an email.

The $43.3 billion retirement system will allocate as much as $200 million to Olympus Partners’ new fund, which launched this year. While the fund’s target wasn’t specified, Johnson said Olympus Growth Fund VII would have a strategy similar to that of its $2.3 billion predecessor, which invested in mid-market companies.

Buyouts previously reported Olympus planned to begin fundraising Fund VII in late 2017.

Olympus typically invests $50 million to $300 million in growth capital or buyout capital.

Fund V, a $1.5 billion 2008 vintage fund, was netting a 17.7 percent internal rate of return as of Dec. 31, UC Board of Regents documents show. Fund VI, a 2013 vintage fund, was still early in its investment period and had yet to deliver meaningful return data, the Board of Regents report shows.

Tennessee also committed up to $165 million to Quantum Energy Partners, Johnson said. As much as $150 million would go to Quantum Energy Partners VII, which is targeting $3.5 billion with a $4.5 billion hard cap, with another $15 million going to a co-investment vehicle that would participate in the fund’s larger vehicles, Johnson wrote.

Quantum VI was marked as netting an 89 percent IRR as of Sept. 30, 2016, placing the vehicle firmly in the top quartile of PE funds, a Nebraska Investment Council document shows.

Tennessee’s investment committee approved the commitments Nov. 17. The retirement system’s investment policy does not indicate whether the commitments require the approval of the full board.

Johnson did not respond to follow-up requests for comment.

Tennessee’s PE portfolio generated a five-year annualized return of 15.01 percent as of June 30, 2016, surpassing its public-market benchmark, according to its most recent annual report.

Tennessee held 3.4 percent of its assets in PE as of June 30, 2016. The system’s target allocation to the asset class was 3 percent at that time.

Action Item: Tennessee’s retirement system: http://treasury.tn.gov/tcrs/#

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