The Washington State Investment Board earlier this month moved closer to its new and comparatively aggressive private equity target allocation of 25 percent. The state pension committed $250 million across four funds, two that are sector specific, one of which represents an emerging markets play, and one that focuses on distressed-debt opportunities.
The limited partner’s biggest commitment was a $600 million slug for Lone Star Fund’s sixth fund, a distressed debt vehicle that is well on its way to its $6.5 billion target, having accumulated $3 billion in commitments in the first quarter from LPs.
The $63 billion pension also committed $100 million to the seventh buyout fund from The Banc Funds, a Chicago-based firm that is seeking $650 million to acquire small U.S.-based financial services companies, including commercial banks. WSIB has committed to three prior Banc Funds vehicles.
And WSIB approved a new $50 million commitment to a fund focusing on the travel and leisure business, care of Denver-based KSL Capital Partners. The money will become part of a $500 million add-on to the $1 billion KSL Capital Partners Supplemental II, which the firm closed in 2006. WSIB had previously committed $100 million to the fund.
Lastly, WSIB green-lighted a $100 million investment in HarbourVest International Private Equity Partners VI, the latest private equity vehicle for Boston-based funds of funds manager HarbourVest Partners. The firm is targeting $3 billion for its newest international vehicle, far larger than its $530 million predecessor. The fund will be used to back buyout firms and buy secondary positions of funds managed by firms based in Europe, Asia Pacific, Australia, and Latin America. WSIB has twice backed HarbourVest twice before.
In November, WSIB raised its target allocation to private equity from an already aggressive 17% to the new benchmark of 25 percent. In comparison, the $165 billion California State Teachers’ Retirement System, one of the world’s largest investors in alternative assets, has a 9% private equity target. At a time when some public pension funds, including CalSTRS, have hit their allocation ceilings because of depressed values in the public markets, WSIB remains a robust player in private equity.
WSIB has plenty of space left under the 25% ceiling. As of Dec. 31, only 15.9% of its assets were invested in private equity.
WSIB is among a number of big LPs that have raised their private equity targets in the last year. Others include the California Public Employees’ Retirement System, Kansas Public Employees’ Retirement System, and Oregon Investment Council.