Tennessee Takes PE Plunge With Three Pledges

A little more than a year after receiving state approval to add private equity to its portfolio mix, the Tennessee Consolidated Retirement System has approved its first commitments to the asset class, pledging a total of $150 million to three private equity firms, Lamar Villere, director of private equity, told Buyouts.

The $26 billion pension fund committed up to $75 million to mega-fund Hellman & Friedman Capital Partners VII LP, which is targeting $7 billion with a hard cap of $10 billion; up to $50 million to TA XI LP, which recently closed with $4 billion; and up to $25 million to Khosla Ventures III LP, which is seeking $750 million for multi-stage venture investments in the information technology and cleantech industries.

The state’s allocation target to private equity is 3 percent, although technically up to 5 percent can be invested in the asset class. Tennessee Consolidated will likely achieve its goal in five years.

The investment policy established last June allows the pension fund to commit to domestic and international venture capital, corporate buyouts, mezzanine, distressed debt, special situations and secondary funds. It can invest in limited partnerships, private placements, co-investments, funds of funds and other commingled funds.

Buyout funds, most of which will invest in U.S. companies, will account for 50 percent to 75 percent of the program, although those that target Western Europe, Canada and Japan will also be considered; mezzanine and distressed funds will take up 15 percent to 20 percent of the private equity portfolio; and venture capital funds will nab 10 percent to 15 percent. A few pledges will also go to secondary funds.