Texas Pledges To Hg; To Commit $600M In 2010

The Employees Retirement System of Texas has approved a pledge of £45 million ($74 million) to HgCapital 6 LP, earmarked for investments in European mid-sized companies, said Mary Jane Wardlow, spokesperson. Looking ahead, Texas plans on pledging $600 million to private equity in 2010.

HgCapital 6 LP is a £1.75 billion ($3.1 billion) fund, with no established hard cap. HgCapital expects to invest the fund in 15 to 20 companies, located mainly in the United Kingdom, Germany and the Benelux region, making an average equity investment of £80 million to £120 million. Industry-wise, the vehicle targets the telecom, media, technology, industrials, health care, consumer, leisure and service sectors.

The pledge marks Texas’s first commitment to London-based HgCapital. Other European firms backed by the $18.4 billion Employees Retirement System of Texas include CVC European Equity Partners and Charterhouse Capital Partners.

In September, the pension fund pledged $50 million to Quantum Energy Partners V and received an LP advisory committee seat on the fund. In addition, the pension fund negotiated a separate transaction involving a $25 million secondary commitment to Quantum Energy Partners V at a 50 percent discount to NAV from a third-party seller. That interest will officially transfer in early January.

Consultant Altius Associates is helping Texas identify funds to invest in, including buyout, growth equity, mezzanine, secondaries, turnaround/restructuring and distressed debt funds. The pension fund made its first private equity pledge in 1998 but did not make its second until 2007. It now has commitments to about 20 private equity funds. The actual allocation to private equity stood at 0.6 percent, as of Sept. 30, a long way from its 8 percent target, which it anticipates reaching in 2015.