Tennessee Taps Cambridge As Consultant, Makes Pledges

The Tennessee Consolidated Retirement System recently hired a consultant for private equity and made more than $100 million in commitments to two private equity managers.

Cambridge Associates LLC will begin its tenure as the pension’s private equity consultant on August 1. Its job is to help the pension identify private equity partnerships and managers. Previously Strategic Investment Solutions held that position.

On the commitment front, a total of $80 million went to two funds run by distressed debt specialist Oaktree Capital Management. Oaktree Opportunities Fund VIII LP and its sidecar vehicle Oaktree Opportunities Fund VIIIb LP will each receive slugs of $40 million from the limited partner. Oaktree Capital will use the vehicles to invest globally in the distressed debt of large, overleveraged companies.

Earlier this year, the $30 billion LP approved a $50 million commitment to Oaktree PPIP Private Fund LP, earmarked for buying senior CMBS from the Treasury Department using leverage. “While we continue to be impressed with Oaktree, we expect this level of manager concentration to be the exception rather than the rule,” a recent board document stated.

In addition, a $25 million commitment went to venture capital firm Venrock Associates for its sixth fund.

Tennessee is a relative newcomer to private equity, having made its initial pledge to the asset class just last year. So far, commitments have gone to Draper Fisher Jurvetson, Hellman & Friedman, Khosla Ventures, Oaktree Capital Management and TA Associates.

The recent board document, which also discussed the private equity program’s performance as of December, noted that the LP is “pleased (if not shocked) to report that the program has a positive IRR of 12.3 percent net of fees due to portfolio valuation increases in the Khosla Ventures III portfolio. Due to the expected impact of the J-curve, we do not expect the overall program’s IRR to remain positive for long, but are pleased with these results nonetheless.”

The LP’s target allocation to private equity is 3 percent, with a cap of 5 percent. Its actual allocation stands at a little more than 1 percent.